Edgar Filing: CORNERSTONE STRATEGIC VALUE FUND INC/ NEW

DRAFT: FOR DISCUSSION PURPOSES ONLY

As filed with the Securities and Exchange Commission
on April _, 2004

SECURITIES ACT FILE NO. 333- ________

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

CORNERSTONE STRATEGIC VALUE FUND, INC.
(Exact Name of Registrant as Specified in Charter)

c/o Bear Stearns Funds Management Inc.,
383 Madison Avenue, New York, New York 10179
(Address of Principal Executive Offices: Number, Street, City, State, Zip Code)

(212) 272-2093
(Registrant's Area Code and Telephone Number)
-----------------------------------------
Ralph W. Bradshaw, President
Cornerstone Strategic Value Fund, Inc.
c/o Bear Stearns Funds Management Inc.
383 Madison Avenue
New York, New York 10179
(Name and Address of Agent for Service)

with copies to:

Thomas R. Westle, Esq.
Blank Rome LLP
405 Lexington Avenue
New York, New York 10174
-----------------------------------------

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Registration Statement becomes effective
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
===============================================================================
TITLE OF PROPOSED PROPOSED
SECURITIES MAXIMUM MAXIMUM AMOUNT OF
BEING AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE(1) FEE
------------------------------------------------------------------------------
Common Stock
($0.01 par value) 134,333,000 $134,333,000 $134,333,000 $17,019.99

(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended,
based on the Exchange Ratio (the net asset value of Progressive Return
Fund, Inc. and Investors First Fund, Inc.).

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

CORNERSTONE STRATEGIC VALUE FUND, INC.

TABLE OF CONTENTS OF FORM N-14

This Registration Statement contains the following papers and documents:
o Cover Sheet
o Contents of Registration Statement
o Form N-14 Cross Reference Sheet
o Letter to Stockholders of Cornerstone Strategic Value Fund, Inc.
o Letter to Stockholders of Progressive Return Fund, Inc.
o Letter to Stockholders of Investor First Fund, Inc.
o Notice of Annual Meeting of Stockholders of Cornerstone Strategic Value
Fund, Inc.
o Notice of Annual Meeting of Stockholders of Progressive Return Fund, Inc.
o Notice of Annual Meeting of Stockholders of Investor First Fund, Inc.
o Part A - Proxy Statement/Prospectus
o Part B - Statement of Additional Information
o Part C - Other Information
o Signature Page o Exhibits

CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933

ITEM NO. PROXY/PROSPECTUS
-------- ----------------

1. Beginning of Registration Statement and
Outside Front Cover Page of Prospectus Cover Page

2. Beginning and Outside Back Cover
Page of Prospectus Cover Page; Table of Contents of Prospectus

3. Fee Table, Synopsis Information
and Risk Factors Synopsis; Risk Factors and Considerations;
Comparison Investment Objectives and
Policies

4. Information about the Transaction Synopsis; Proposed Information about the
Merger; Additional Information about the
Funds

5. Information about the Registrant
Synopsis; Risk Factors and Considerations;
Comparison of Investment Objectives and Policies;
and Additional Information about the Funds

6. Information about the Company Being Acquired Synopsis; Risk Factors and Special
Considerations; Comparison of Investment
Objectives and Policies; and Additional
Information about the Funds

7. Voting Information Notice of Meeting of Stockholders;
General; Required Vote

8. Interest of Certain Persons and Experts Additional Information about the Funds

9. Additional Information Required for Reoffering
by Persons Deemed to be Underwriters Not Applicable

ITEM NO. STATEMENT OF ADDITIONAL INFORMATION

10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. Additional Information About
the Registrant Proxy Statement/Prospectus

13. Additional Information about
the Company being Acquired Proxy Statement/Prospectus

14. Financial Statements Financial Statements

15 - 17 Information required to be included in
Part C is set forth under the
appropriate item, so numbered, in
Part C of this Registration Statement

CORNERSTONE STRATEGIC VALUE FUND, INC.
c/o Bear Stearns Funds Management, Inc.
383 Madison Avenue
New York, New York 10179
April 26, 2004
Dear Stockholder:

We are pleased to invite you to the Annual Meeting of Stockholders (the
"Annual Meeting") of Cornerstone Strategic Value Fund, Inc., a Maryland
corporation ("CLM").

The Annual Meeting is scheduled to be held at 10:30 a.m. (EST) on
Thursday, June 10, 2004, at the offices of Bear Stearns Funds Management Inc.,
383 Madison Avenue, New York, New York 10179. At the Annual Meeting,
Stockholders will be asked to approve the following proposals:

(1) to approve a Merger Agreement and Plan of Reorganization (the
"PGF Plan" or "PGF Merger Agreement"), whereby Progressive
Return Fund, Inc. ("PGF") will merge with and into CLM in
accordance with the Maryland General Corporation Law;
(2) to approve a Merger Agreement and Plan of Reorganization (the
"MGC Plan" or "MGC Merger Agreement"), whereby Investors First
Fund, Inc. ("MGC") will merge with and into CLM in accordance
with the Maryland General Corporation Law;
(3) to approve an amendment to the Articles of Incorporation
increasing the amount of the authorized shares of the Fund and
changing the par value of the Fund's common stock; and
(4) to approve the re-election of Messrs. Strauss and Wilcox, Sr.
as Class III Directors and the re-election of Mr. Clark as a
Class II Director.

The Board of Directors of the Fund believes that each merger, while
separate and distinct from each other, is very important to your interests as a
stockholder. Please note that because each merger is separate and distinct, it
is possible that one, both or none of the mergers may occur.

Stockholders who are unable to attend this meeting are strongly
encouraged to vote by proxy, which is customary in corporate meetings of this
kind. A Proxy Statement/Prospectus regarding the meeting, a proxy card(s) for
your vote at the meeting and an envelope - postage prepaid - in which to return
your proxy card are enclosed. At the Annual Meeting you will be asked to vote on
four matters.

THE BOARD OF DIRECTORS OF THE FUND BELIEVES THAT: (I) THE PROPOSED PGF MERGER;
(II) THE PROPOSED MGC MERGER; (III) THE AMENDMENT TO THE ARTICLES OF
INCORPORATION; AND (IV) THE RE-ELECTION OF THE BOARD OF DIRECTORS ARE EACH IN
THE BEST INTERESTS OF THE FUND AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOU READ
THE ENCLOSED MATERIALS CAREFULLY AND THEN VOTE "FOR" PROPOSALS 1, 2, 3 AND 4.

YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU MAY OWN. PLEASE TAKE A FEW
MINUTES TO REVIEW THIS PROXY STATEMENT AND VOTE YOUR SHARES TODAY.

CLM has engaged InvestorCONNECT, a professional proxy solicitor, to assist
shareholders throughout the voting process. If you should have any questions
regarding this proxy material, you can contact InvestorCONNECT at (800)
870-0658. As the meeting date approaches and we still have not received your
proxy, you may receive a call from InvestorCONNECT encouraging you to vote your
shares in order to be represented at this meeting.

Respectfully,

Ralph W. Bradshaw
Chairman of the Board of Directors

YOU ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN THE CARD(S) IN THE
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.

PROGRESSIVE RETURN FUND, INC.
c/o Bear Stearns Funds Management Inc.
383 Madison Avenue
New York, New York 10179
April 26, 2004

Dear Stockholder:

We are pleased to invite you to the Annual Meeting of Stockholders (the
"Annual Meeting") of Progressive Return Fund, Inc., a Maryland corporation
("PGF").

The Annual Meeting is scheduled to be held at 10:00 a.m. (EST) on
Thursday, June 10, 2004, at the offices of Bear Stearns Funds Management Inc.,
383 Madison Avenue, New York, New York 10179. At the Annual Meeting,
stockholders will be asked to consider and approve the following proposals:

(1) to approve a Merger Agreement and Plan of Reorganization (the
"PGF Plan" or "PGF Merger Agreement"), whereby PGF will merge
with and into Cornerstone Strategic Value Fund, Inc. ("CLM")
in accordance with the Maryland General Corporation Law;

and, in the event that either the CLM or the PGF stockholders do not
approve the PGF Merger, then the PGF stockholders will be asked to approve the
following proposal:

(2) to approve the re-election of Messrs. Lenagh and Strauss as
Class I Directors and the re-election of Mr. Clark as Class
III Director.

As a result of the approval of the merger, PGF will cease to exist and
CLM will be the surviving corporation. PGF stockholders should note that at the
CLM Annual Meeting, CLM stockholders will be asked to approve a separate and
distinct merger agreement whereby Investors First Fund, Inc. will be merged with
and into CLM. The PGF merger will have a significant impact on each PGF
stockholder and you are strongly urged to read all of the information contained
in the Combined Proxy Statement/Prospectus, including the information concerning
the MGC Merger.

THE BOARD OF DIRECTORS OF THE FUND BELIEVES THAT THE PROPOSED PGF MERGER IS IN
THE BEST INTERESTS OF THE FUND AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOU READ
THE ENCLOSED MATERIALS CAREFULLY AND THEN VOTE "FOR" PROPOSAL 1.

THE BOARD OF DIRECTORS OF THE FUND BELIEVES THAT, IN THE ALTERNATIVE, IF THE
PROPOSED MERGER IS NOT CONSUMMATED, THAT THE VOTE FOR CONTINGENT PROPOSAL 2, THE
RE-ELECTION OF THE DIRECTORS, IS IN THE BEST INTERESTS OF THE FUND AND ITS
STOCKHOLDERS AND RECOMMENDS THAT YOU READ THE ENCLOSED MATERIALS CAREFULLY AND
THEN VOTE "FOR" PROPOSAL 2.

YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU MAY OWN. PLEASE TAKE A FEW
MINUTES TO REVIEW THIS PROXY STATEMENT AND VOTE YOUR SHARES TODAY.

PGF has engaged InvestorCONNECT, a professional proxy solicitor, to assist
shareholders throughout the voting process. If you should have any questions
regarding this proxy material, you can contact InvestorCONNECT at (800)
870-0658. As the meeting date approaches and we still have not received your
proxy, you may receive a call from InvestorCONNECT encouraging you to vote your
shares in order to be represented at this meeting.

Respectfully,

Ralph W. Bradshaw
Chairman of the Board of Directors

YOU ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN THE CARD(S) IN THE
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.

INVESTORS FIRST FUND, INC.
c/o Bear Stearns Funds Management Inc.
383 Madison Avenue
New York, New York 10179
April 26, 2004

Dear Stockholder:

We are pleased to invite you to the Annual Meeting of Stockholders (the
"Annual Meeting") of Investors First Fund, Inc. ("MGC"), a Maryland corporation.

The Annual Meeting is scheduled to be held at 9:30 a.m. (EST) on
Thursday, June 10, 2004, at the offices of Bear Stearns Funds Management Inc.,
383 Madison Avenue, New York, New York 10179. At the Annual Meeting,
stockholders will be asked to approve the following proposals:

(1) to approve a Merger Agreement and Plan of Reorganization (the
"MGC Plan" or "MGC Merger Agreement"), whereby MGC will merge
with and into Cornerstone Strategic Value Fund, Inc. ("CLM")
in accordance with the Maryland General Corporation Law;

and, in the event that either the CLM or the MGC stockholders do not
approve the MGC Merger, then the MGC stockholders will be asked to approve the
following proposal:

(2) the re-election of Messrs. Bradshaw and Clark as Directors to
serve until the 2007 Annual Meeting of Stockholders.

As a result of the approval of the merger, MGC will cease to exist and
CLM will be the surviving corporation. MGC stockholders should note that at the
CLM Annual Meeting, CLM stockholders will be asked to approve a separate and
distinct merger agreement whereby Progressive Return Fund, Inc. will be merged
with and into CLM. The MGC Merger will have a significant impact on each MGC
stockholder and you are strongly urged to read all of the information contained
in the Combined Proxy Statement/Prospectus, including the information concerning
the PGF Merger.

THE BOARD OF DIRECTORS OF THE FUND BELIEVES THAT THE PROPOSED MGC MERGER IS IN
THE BEST INTERESTS OF THE FUND AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOU READ
THE ENCLOSED MATERIALS CAREFULLY AND THEN VOTE "FOR" PROPOSAL 1.

YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU MAY OWN. PLEASE TAKE A FEW
MINUTES TO REVIEW THIS PROXY STATEMENT AND VOTE YOUR SHARES TODAY.

MGC has engaged InvestorCONNECT, a professional proxy solicitor, to assist
shareholders throughout the voting process. If you should have any questions
regarding this proxy material, you can contact InvestorCONNECT at (800)
870-0658. As the meeting date approaches and we still have not received your
proxy, you may receive a call from InvestorCONNECT encouraging you to vote your
shares in order to be represented at this meeting.

Respectfully,

William A. Clark
Chairman of the Board of Directors

YOU ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN THE CARD(S) IN THE
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.

CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Notice is hereby given that the Annual Meeting of Stockholders (the
"CLM Annual Meeting") of Cornerstone Strategic Value Fund, Inc. ("CLM"), a
Maryland corporation, will be held at the offices of Bear Stearns Funds
Management Inc., 383 Madison Avenue, New York, New York 10179, on Thursday, June
10, 2004, at 10:30 a.m. (EST), for the following purposes:

(1) To consider and vote upon the approval of a PGF Merger
Agreement and Plan of Reorganization dated June 18, 2004
whereby Progressive Return Fund, Inc. ("PGF") will merge with
and into CLM, in accordance with the Maryland General
Corporation Law;
(2) To consider and vote upon the approval of a MGC Merger
Agreement and Plan of Reorganization dated June 18, 2004
whereby Investors First Fund, Inc. ("MGC") will merge with and
into CLM, in accordance with the Maryland General Corporation
Law;
(3) To consider and approve an amendment to the Articles of
Incorporation increasing the amount of authorized shares and
changing the par value per share of CLM's common stock ; and
(4) To re-elect Messrs. Strauss and Wilcox, Sr. as Class III
Directors and to re-elect Mr. Clark as a Class II Director.

The appointed proxies will vote in their discretion on any other
business that may properly come before the CLM Annual Meeting or any
adjournments thereof.

Holders of record of shares of common stock of CLM at the close of
business on March 24, 2004 (the "Record Date") are entitled to vote at the CLM
Annual Meeting and at any postponements or adjournments thereof. In addition to
stockholders of CLM approving each of the proposed mergers with PGF and MGC, PGF
stockholders must approve the PGF merger, and MGC stockholders must approve the
MGC merger.

The persons named as proxies may propose one or more adjournments of
the CLM Annual Meeting if the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the meeting. Any
such adjournment will require the affirmative vote of the holders of a majority
of CLM's shares present in person or by proxy at the CLM Annual Meeting. The
persons named as proxies will vote those proxies which they are entitled to vote
on any such proposal in accordance with their best judgment in the interest of
CLM.

The enclosed proxy is being solicited on behalf of the Board of
Directors of CLM.

By Order of the Board of Directors,

Ralph W. Bradshaw, President

PROGRESSIVE RETURN FUND, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Notice is hereby given that the Annual Meeting of Stockholders (the
"PGF Annual Meeting") of Progressive Return Fund, Inc. ("PGF"), a Maryland
corporation, will be held at the offices of Bear Stearns Funds Management Inc.,
383 Madison Avenue, New York, New York 10179, on Thursday, June 10, 2004, at
10:00 a.m. (EST) for the following purposes:

1. To consider and vote upon the approval of a PGF Merger
Agreement and Plan of Reorganization dated June 18, 2004
whereby PGF will merge with and into Cornerstone Strategic
Value Fund, Inc. ("CLM"), in accordance with the Maryland
General Corporation Law;

and, in the alternative if stockholders do not approve the PGF Merger
proposal, then stockholders will be asked to vote upon Proposal 2:

2. To consider and vote upon the re-election of Messrs. Lenagh
and Strauss as Class I Directors and Mr. Clark as Class III
Director.

The appointed proxies will vote in their discretion on any other
business that may properly come before the PGF Annual Meeting or any
adjournments thereof.

Holders of record of shares of common stock of PGF at the close of
business on March 24, 2004 (the "Record Date") are entitled to vote at the PGF
Annual Meeting and at any postponements or adjournments thereof. CLM
stockholders must approve the merger as well. CLM stockholders are also being
asked to approve a merger agreement between CLM and Investors First Fund, Inc.
which, if approved, will be effective simultaneously with this Merger. For
further information concerning each merger, please refer to the combined Proxy
Statement/Prospectus enclosed herein.

The persons named as proxies may propose one or more adjournments of
the PGF Annual Meeting if the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the meeting. Any
such adjournment will require the affirmative vote of the holders of a majority
of PGF's shares present in person or by proxy at the PGF Annual Meeting. The
persons named as proxies will vote those proxies which they are entitled to vote
on any such proposal in accordance with their best judgment in the interest of
PGF.

The enclosed proxy is being solicited on behalf of the Board of
Directors of PGF.

By Order of the Board of Directors,

Ralph W. Bradshaw, President

INVESTORS FIRST FUND, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Notice is hereby given that the Annual Meeting of Stockholders (the
"MGC Annual Meeting") of Investors First Fund, Inc. ("MGC"), a Maryland
corporation, will be held at the offices of Bear Stearns Funds Management Inc.,
383 Madison Avenue, New York, New York 10179, on Thursday, June 10, 2004, at
9:30 a.m. (EST) for the following purposes:

1. To consider and vote upon the approval of a MGC Merger
Agreement and Plan of Reorganization dated June 18, 2004
whereby MGC will merge with and into Cornerstone Strategic
Value Fund, Inc. ("CLM"), in accordance with the Maryland
General Corporation Law;

and, in the alternative if stockholders do not approve the MGC Merger
proposal, then stockholders will be asked to vote upon Proposal 2:

2. To consider and vote upon the re-election of Messrs. Bradshaw
and Clark as members of the Board of Directors each to serve
until the Year 2007 Annual Meeting of Stockholders.

The appointed proxies will vote in their discretion on any other
business that may properly come before the MGC Annual Meeting or any
adjournments thereof.

Holders of record of shares of common stock of MGC at the close of
business on March 24, 2004 (the "Record Date") are entitled to vote at the MGC
Annual Meeting and at any postponements or adjournments thereof. CLM
stockholders must approve the merger as well. CLM stockholders are also being
asked to approve a merger agreement between CLM and Progressive Return Fund,
Inc. which, if approved, will be effective simultaneously with this merger. For
further information concerning each merger, please refer to the combined Proxy
Statement/Prospectus enclosed herein.

The persons named as proxies may propose one or more adjournments of
the MGC Annual Meeting if the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the meeting. Any
such adjournment will require the affirmative vote of the holders of a majority
of MGC's shares present in person or by proxy at the MGC Annual Meeting. The
persons named as proxies will vote those proxies which they are entitled to vote
on any such proposal in accordance with their best judgment in the interest of
MGC.

The enclosed proxy is being solicited on behalf of the Board of
Directors of MGC.

By Order of the Board of Directors,

William A. Clark, President

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

COMBINED PROXY STATEMENT/PROSPECTUS

CORNERSTONE STRATEGIC VALUE FUND, INC.

PROGRESSIVE RETURN FUND, INC.

AND

INVESTORS FIRST FUND, INC.

This combined Proxy Statement/Prospectus is being furnished to
stockholders of Cornerstone Strategic Value Fund, Inc. ("CLM"), Progressive
Return Fund, Inc. ("PGF") and Investors First Fund, Inc. ("MGC") for use at each
Fund's Annual Meeting of Stockholders (CLM, PGF and MGC may be referred to
hereinafter as the "Fund" or collectively, the "Funds"). Each of the PGF Annual
Meeting, CLM Annual Meeting and MGC Annual Meeting will be held on Thursday,
June 10, 2004 at 10:30 a.m. (EST), at 10:00 a.m. (EST), and at 9:30 a.m. (EST),
respectively, and at any and all postponements or adjournments thereof.

Throughout this Combined Proxy Statement/Prospectus the CLM Annual
Meeting, PGF Annual Meeting and the MGC Annual Meeting shall collectively be
referred to as the "Meetings." The approximate mailing date of this Proxy
Statement/Prospectus is April 26, 2004.

PURPOSE OF THE MEETINGS.

The Meetings are being called for the following purposes:

1. At the CLM and PGF Annual Meetings, stockholders of CLM and
PGF will be asked to approve the PGF Merger Agreement and Plan
of Reorganization dated June 18, 2004 (the "PGF Plan") whereby
PGF will merge with and into CLM, in accordance with the
Maryland General Corporation Law.

2. At the CLM and MGC Annual Meetings, stockholders of CLM and
MGC will be asked to approve the MGC Merger Agreement and Plan
of Reorganization dated June 18, 2004 (the "MGC Plan") whereby
MGC will merge with and into CLM, in accordance with the
Maryland General Corporation Law.

3. At the CLM Annual Meeting, stockholders of CLM will asked to
consider and approve an Amendment to the Articles of
Incorporation increasing the amount of authorized shares of
CLM common stock and changing the par value per share.

4. At the CLM Annual Meeting, stockholders of CLM will further be
asked to consider and approve the re-election of Messrs.
Strauss and Wilcox, Sr. as Class III members of the Board of
Directors and Mr. Clark as a Class II member of the Board of
Directors.

5. At the PGF Annual Meeting and in the event that the PGF Merger
is not consummated, PGF's stockholders will be asked to
contingently vote on the re-election of Messrs. Lenagh and
Strauss as Class I members of the Board of Directors and Mr.
Clark as a Class III member of the Board of Directors.

6. At the MGC Annual Meeting and in the event that the MGC Merger
is not consummated, MGC's stockholders will be asked to
contingently vote on the re-election of Messrs. Bradshaw and
Clark as members of the Board of Directors.

CLM stockholders should note that each of the PGF Merger and the MGC
Merger are separate proposals requiring their consideration and approval and,
therefore, should be analyzed as such. Stockholders of PGF and MGC should note
that each merger proposal is separate and distinct from the other.

SPECIFICS OF EACH PLAN OF REORGANIZATION.

PGF MERGER: As a result of the approval of the PGF Merger:

(i) PGF will no longer exist,
(ii) CLM will be the surviving corporation,
(iii) each share of common stock of PGF will convert into an
equivalent dollar amount of full and fractional shares of
common stock of CLM based on the relative net asset value per
share of each Fund on the business day preceding the day on
which the PGF Merger is consummated,
(iv) each PGF stockholder participating in the PGF dividend
reinvestment plan shall receive fractional shares of CLM based
on the relative net asset value per share of each Fund on the
business day preceding the day on which the PGF Merger is
consummated, and
(v) PGF stockholders that do not participate in the PGF dividend
reinvestment plan will not receive fractional shares, rather
CLM's transfer agent will aggregate all fractional shares,
sell the resulting full shares on the American Stock Exchange,
LLC (the "AMEX") at the then current price and remit the
proceeds to PGF's stockholders in proportion to their
fractional shares.

In connection with the merger, CLM will issue that number of shares
that have an aggregate net asset value equal to the aggregate net asset value of
the outstanding shares of PGF. Each PGF stockholder, in connection with the
merger, will receive shares of CLM having an aggregate net asset value equal to
the aggregate net asset value of the stockholder's PGF shares at the close of
business on the day before the Effective Date of the PGF Merger. While the total
net asset value of shares received by each PGF stockholder in the merger may be
the same as before the merger, the market value of CLM shares that a PGF
stockholder receives in the merger may be more or less than the market value of
PGF shares that such stockholder owned immediately before the merger, depending
on the current market discount or premium levels of CLM and PGF. Shares of
closed-end investment companies frequently trade at a market price that is less
than or greater than the value of the fund's assets.

MGC MERGER: As a result of the approval of the MGC Merger:

(i) MGC will no longer exist,
(ii) CLM will be the surviving corporation,
(iii) each share of common stock of MGC will convert into an
equivalent dollar amount of full and fractional shares of
common stock of CLM based on the relative net asset value per
share of each Fund on the business day preceding the day on
which the MGC Merger is consummated,
(iv) each MGC stockholder that participates in the MGC dividend
reinvestment plan shall receive fractional shares of CLM based
on the relative net asset value per share of each Fund on the
business day preceding the day on which the MGC Merger is
consummated, and
(v) MGC stockholders that do not participate in the MGC dividend
reinvestment plan will not receive fractional shares, rather
CLM's transfer agent will aggregate all fractional shares,
sell the resulting full shares on the AMEX at the then current
price and remit the proceeds to MGC's stockholders in
proportion to their fractional shares.

In connection with the MGC Merger, CLM will issue that number of shares
that have an aggregate net asset value equal to the aggregate net asset value of
the outstanding shares of MGC. Each MGC stockholder, in connection with the
merger, will receive shares of CLM having an aggregate net asset value equal to
the aggregate net asset value of the stockholder's MGC shares at the close of

business on the day before the Effective Date of the MGC Merger. While the total
net asset value of shares received by each MGC stockholder in the merger may be
the same as before the merger, the market value of CLM shares that a MGC
stockholder receives in the merger may be more or less than the market value of
MGC shares that such stockholder owned immediately before the merger, depending
on the current market discount or premium levels of CLM and MGC. Shares of
closed-end investment companies frequently trade at a market price that is less
than or greater than the value of the fund's assets.

The proposed mergers are separate and distinct from each other, and no
assurances can be given that either of the proposed mergers will be approved by
stockholders of the respective Funds.

CLM, PGF and MGC are each registered with the U.S. Securities and
Exchange Commission (the "SEC") as a closed-end management investment company
and, shares of CLM and PGF are both listed on the AMEX, and shares of MGC is
listed on the New York Stock Exchange, Inc. (the "NYSE"). CLM and MGC are each
classified as a diversified management investment company, whereas, PGF are
classified as a non-diversified management investment company. CLM's investment
objective is to seek long-term capital appreciation through investment in equity
securities of U.S. and non-U.S. companies. PGF seeks total return consisting of
capital appreciation and current income by investing primarily in U.S. and
non-U.S. securities. MGC seeks capital appreciation and current income by
investing primarily in common stocks and securities convertible into common
stock, substantially all of which will be U.S. securities. The current
investment objective and policies of CLM will continue unchanged regardless of
whether the mergers occur.

The terms and conditions of the proposed mergers are more fully
described in this Proxy Statement/Prospectus and in each Plan, copies of which
are attached hereto as Exhibits A and B.

This Proxy Statement/Prospectus serves as a prospectus for shares of
CLM under the Securities Act of 1933, as amended (the "Securities Act"), in
connection with the issuance of CLM shares of common stock pursuant to each
respective merger.

PGF MERGER

Assuming the stockholders of PGF and CLM approve the PGF Merger and
that all other conditions contained in the PGF Merger Agreement are satisfied or
waived, CLM and PGF will jointly file articles of merger (the "PGF Articles of
Merger"), with the State Department of Assessments and Taxation of Maryland (the
"Department"). It is proposed that the PGF Merger will become effective on June
18, 2004, or such other date as may result from the application of the terms of
the PGF Merger Agreement (the "PGF Effective Date"). PGF, as soon as practicable
after the PGF Effective Date, will terminate its registration under the
Investment Company Act of 1940, as amended (the "Investment Company Act").

MGC MERGER

Assuming the stockholders of MGC and CLM approve the MGC Merger and
that all other conditions contained in the MGC Merger Agreement are satisfied or
waived, CLM and MGC will jointly file articles of merger (the "MGC Articles of
Merger"), with the Department. It is proposed that the MGC Merger will become
effective on June 18, 2004, or such other date as may result from the
application of the terms of the MGC Merger Agreement (the "MGC Effective Date").
MGC, as soon as practicable after the MGC Effective Date, will terminate its
registration under the Investment Company Act.

Under Section 3-202 of the Maryland General Corporation Law (the
"MGCL"), stockholders of PGF, CLM and MGC are not entitled to any appraisal or
similar rights in connection with each respective merger contemplated by the
respective Plans.

This Proxy Statement/Prospectus sets forth concisely the information
about each Fund that you should be aware of before voting upon a merger
proposal. You should retain this Proxy Statement/Prospectus for future reference
as it sets forth information about CLM, PGF and MGC that you should know before
voting on any merger proposal.

iii

A Statement of Additional Information (the "SAI") dated April __, 2004,
which contains additional information about CLM has been filed with the SEC. The
SAI for CLM and financial statements of PGF, CLM and MGC for the calendar year
ended December 31, 2003 are incorporated by reference into this Proxy
STATEMENT/PROSPECTUS. Copies of these documents are available upon request and
without charge by writing to the Assistant Secretary of the Fund c/o Bear
Stearns Funds Management Inc. located at 383 Madison Avenue, 23rd Floor, New
York, New York 10179, or by calling 1-800-837-2755. You may ask questions about
any of the Funds by calling 1-800-837-2755. PGF has provided the information
included in this Proxy Statement/Prospectus regarding that Fund, CLM has
provided the information included in this Proxy Statement/Prospectus regarding
that Fund, and MGC has provided the information included in this Proxy
Statement/Prospectus regarding that Fund.

CLM's shares of common stock are listed on the AMEX under the symbol
"CLM," PGF's shares of common stock are listed on the AMEX under the symbol
"PGF," and MGC's shares of common stock are listed on the NYSE under the symbol
"MGC." After the Effective Date, shares of common stock of CLM will continue to
be listed on the AMEX under the symbol "CLM." Reports, proxy materials and other
information concerning each Fund may be inspected at the offices of the AMEX, 86
Trinity Place, New York, New York 10006, for CLM and PGF, and at the offices of
the NYSE, 11 Wall Street, New York, New York 10005, for MGC.

The SEC has not approved or disapproved these securities or determined
if this Proxy Statement/Prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.

The date of this Proxy Statement/Prospectus is April 26, 2004

TABLE OF CONTENTS
Page
General .................................................................... 1

ITEM I. PGF MERGER PROPOSAL TO BE VOTED ON BY STOCKHOLDERS OF PGF AND CLM

Proposal 1 (PGF and CLM Stockholders Only): APPROVAL OF THE PGF MERGER AGREEMENT
AND PLAN OF REORGANIZATION ................................................. 3

Synopsis .......................................................... 4
Principal Risk Factors ............................................ 6
Expense Table ..................................................... 9
Financial Highlights .............................................. 9
Comparison of Investment Objectives and Policies .................. 10
United States Federal Income Taxes ................................ 13
Information about the Merger ...................................... 14
Additional Information about the Funds ............................ 19
Management of the Funds ........................................... 24
Experts ........................................................... 26
Required Vote ..................................................... 26
Legal Proceedings ................................................. 26
Legal Opinions .................................................... 26

ITEM II. MGC MERGER PROPOSAL TO BE VOTED ON BY STOCKHOLDERS OF MGC AND CLM

Proposal 2 (MGC and CLM Stockholders Only): APPROVAL OF THE MGC MERGER AGREEMENT
AND PLAN OF REORGANIZATION ................................................. 27

Synopsis .......................................................... 28
Principal Risk Factors ............................................ 31
Expense Table ..................................................... 33
Financial Highlights .............................................. 34
Comparison of Investment Objectives and Policies .................. 34
United States Federal Income Taxes ................................ 37
Information about the Merger ...................................... 38
Additional Information about the Funds ............................ 43
Management of the Funds ........................................... 47
Experts ........................................................... 50
Required Vote ..................................................... 50
Legal Proceedings ................................................. 50
Legal Opinions .................................................... 50

ITEM III. ADDITIONAL PROPOSALS TO BE VOTED ON BY CLM STOCKHOLDERS

CLM Proposal 3: Amendment to the Articles of Incorporation ................. 51

CLM Proposal 4: Election of Directors ...................................... 52

ITEM IV ADDITIONAL PROPOSAL TO BE VOTED ON BY PGF STOCKHOLDERS WHICH WILL
ONLY TAKE EFFECT IN THE EVENT THAT ITEM I - PROPOSAL 1 IS NOT APPROVED
BY BOTH FUNDS' STOCKHOLDER'S

PGF Proposal 2: Election of Directors ...................................... 60

ITEM V ADDITIONAL PROPOSAL TO BE VOTED ON BY MGC STOCKHOLDERS WHICH WILL
ONLY TAKE EFFECT IN THE EVENT THAT ITEM II - PROPOSAL 2 IS NOT APPROVED
BY BOTH FUNDS' STOCKHOLDER'S

MGC Proposal 2: Election of Directors ...................................... 68

Additional Information ..................................................... 75

Exhibit A: Form of PGF Merger Agreement .................................... A-1

Exhibit B: Form of MGC Merger Agreement .................................... B-1

Exhibit C1: Form of CLM Proxy Card .........................................C1-1

Exhibit C2: Form of PGF Proxy Card .........................................C2-1

Exhibit C3: Form of MGC Proxy Card .........................................C3-1

Exhibit D: Amendment to the Articles of Incorporation ...................... D-1

Exhibit E: CLM Audit Committee Charter ..................................... E-1

Exhibit F: PGF Audit Committee Charter ..................................... F-1

Exhibit G: MGC Audit Committee Charter ..................................... G-1

GENERAL

This combined Proxy Statement/Prospectus is furnished to the
stockholders of each Fund in connection with the solicitation of proxies on
behalf of each of its Board of Directors. The Board of Directors of each Fund is
soliciting proxies for use at each Fund's respective Annual Meeting. The mailing
address for each Fund is c/o Bear Stearns Funds Management Inc., 383 Madison
Avenue, New York, New York 10179.

This Proxy Statement/Prospectus, the Notices of Meeting to Stockholders
and the proxy card(s) (attached hereto as Exhibits C) are first being mailed to
stockholders on or about April 26, 2004 or as soon as practicable thereafter.
Any stockholder who gives a proxy has the power to revoke the proxy either: (i)
by mail, addressed to the Secretary of the respective Fund, at the Fund's
mailing address, or (ii) in person at the Meeting by executing a superseding
proxy or by submitting a notice of revocation to the respective Fund. All
properly executed proxies received in time for the meetings will be voted as
specified in the proxy or, if no specification is made, "FOR" each proposal for
that Fund.

Stockholders of both PGF and CLM will be asked to vote on Item I -
Proposal 1 -- the approval of the PGF Merger. Stockholders of MGC and CLM will
be asked to vote on Item II - Proposal 2 - the approval of the MGC Merger. CLM
stockholders will be asked to vote on Item III - Proposals 3 and 4 - the
approval of the Articles of Amendment to the Articles of Incorporation and the
re-election of Messrs. Strauss and Wilcox, Sr. as Class III members of the Board
of Directors and Mr. Clark as a Class II member of the Board of Directors.

In the event that the PGF Merger is not consummated, PGF stockholders
will be asked to contingently vote on Item IV - Proposal 2 -- the re-election of
Messrs. Lenagh and Strauss as Class I members of the Board of Directors and Mr.
Clark as a Class III member of the Board of Directors.

Finally, in the event that that MGC Merger is not consummated, MGC
stockholders will be asked to contingently vote on Item V - Proposal 2 -- the
re-election of Messrs. Bradshaw and Clark, as Directors of the Fund.

QUORUM

The presence, either in person or by proxy, of the holders of one-third
of the outstanding shares of common stock entitled to vote at a meeting of PGF
and CLM, will constitute a quorum for the transaction of business. The presence,
either in person or by proxy, of the holders of a majority of the outstanding
shares of common stock entitled to vote at a meeting of MGC, will constitute a
quorum for the transaction of business. For purposes of determining the presence
of a quorum for transacting business at a meeting, abstentions and broker
"non-votes" will be treated as shares that are present. Broker non-votes are
proxies received by a Fund from brokers or nominees, indicating that the broker
or nominee has neither received instructions from the beneficial owner or other
persons entitled to vote nor has the discretionary power to vote on a particular
matter. Stockholders are urged to forward their voting instructions promptly.

REQUIRED VOTE

Item I - Proposal 1 (the PGF Merger), to be submitted at the PGF and
CLM Annual Meetings, requires the affirmative vote of a majority of the
outstanding shares of common stock of each Fund.

Item II - Proposal 2 (the MGC Merger), to be submitted at the MGC and
CLM Annual Meetings, requires the affirmative vote of a majority of the
outstanding shares of common stock of each Fund.

Item III - CLM Proposal 3 (the Amendment to the Articles of
Incorporation), to be submitted at the CLM Annual Meeting, requires the
affirmative vote of a majority of the outstanding shares of common stock of CLM.

Item III - CLM Proposal 4 (the re-election of the Directors), to be
submitted at the CLM Annual Meeting, requires a plurality of the votes cast at
the Meeting.

-1-

Item IV -- PGF Proposal 2 (the re-election of the Directors), to be
submitted at the PGF Annual Meeting, requires a plurality of the votes cast at
the Meeting.

Item V -- MGC Proposal 2 (the re-election of the Directors), to be
submitted at the MGC Annual Meeting, requires a plurality of the votes cast at
the Meeting.

Abstentions and broker non-votes will have the effect of a "no" vote
for Items I, II, and III - Proposal 3, and will have no effect on Items III -
CLM's Proposal 4, IV or V.

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 each Fund, Cornerstone Advisors, Inc., the investment
adviser of CLM and PGF ("Cornerstone Advisors" or the "Advisor"), Bear Stearns
Funds Management Inc., the administrator to each Fund ("BSFM" or the
"Administrator"), and InvestorCONNECT, a professional proxy solicitor
("InvestorCONNECT"). Each Fund will bear its respective costs of solicitation.

An agreement between each Fund and InvestorCONNECT provides for
InvestorCONNECT to provide general solicitation services to each Fund at an
estimated cost, including expenses, of $10,100, $9,200 and $13,900 for CLM, PGF
and MGC, respectively. Each Fund will, upon request, bear the reasonable
expenses of brokers, bank and their nominees who are holders of record of the
Fund's voting securities on the record date, incurred in mailing copies of this
Proxy Statement/Prospectus to the beneficial owners of the Funds' voting
securities.

Only stockholders of record of each Fund at the close of business on
March 24, 2004 (the "Record Date"), are entitled to vote. Each outstanding share
of each Fund is entitled to one vote on all matters voted upon at a meeting of
the stockholders of that Fund. As of March 24, 2004, there were approximately
3,857,629 shares of CLM outstanding, approximately 1,170,103 shares of PGF
outstanding, and approximately 9,875,409 shares of MGC outstanding.

Each of CLM, PGF and MGC provide periodic reports to all of its
stockholders. These reports highlight relevant information including investment
results and a review of portfolio changes for each Fund. You may receive a copy
of the most recent annual and semi-annual reports for CLM, PGF or MGC, without
charge, by calling 1-800-837-2755 or writing to the Secretary of the Fund c/o
Bear Stearns Funds Management Inc. located at 383 Madison Avenue, 23rd Floor,
New York, New York 10179.

The Board of Directors of each Fund knows of no business other than the
proposals described above which will be presented for consideration at each
Fund's respective Annual Meeting. If any other matter is properly presented, it
is the intention of the persons named in the enclosed proxy to vote on that
matter in their discretion.

-2-

ITEM I. MERGER PROPOSAL TO BE VOTED ON BY STOCKHOLDERS OF PGF AND CLM.

PROPOSAL 1:

APPROVAL OF THE PGF MERGER AGREEMENT AND PLAN
OF REORGANIZATION (THE "PGF PLAN")

On January 30, 2004 and February 20, 2004, the Boards of Directors of
both Funds, including a majority of the Directors who are not "interested
persons," as such term is defined in Section 2(a)(19) of the Investment Company
Act (the "Non-interested Directors"), unanimously:

(1) declared that the merger of PGF with and into CLM is in the
best interest of each Fund and its stockholders;
(2) declared that in their respective opinions neither Fund's
existing stockholders will be diluted as a result of the
Merger;
(3) approved the PGF Plan; and
(4) recommended that the stockholders of each Fund approve the PGF
Plan.

Stockholders should note that the composition of the Board of Directors
of each Fund is identical, therefore, the Non-interested Directors are
"non-interested" with respect to each Fund but might not be considered to be at
arms-length with respect to the proposed PGF Merger. The Board of Directors of
each Fund suggests that stockholders carefully review the information contained
in the Proxy Statement/Prospectus before casting a vote.

For more information about the merger, see "Information about the PGF
Merger."

The PGF Plan is subject to the approval of the stockholders of each
Fund and certain other conditions that are explained below. It provides for the
merger (the "PGF Merger") of PGF with and into CLM in accordance with the MGCL.

As a result of the PGF Merger:

(1) PGF will no longer exist;
(2) CLM will be the surviving corporation, and then
(a) each share of common stock of PGF will convert into
an equivalent dollar amount of full and fractional
shares of common stock of CLM based on the relative
net asset value per share of each Fund calculated at
the close of business on the Business Day (as such
term is defined in the PGF Plan) preceding the
Effective Date,
(b) PGF stockholders participating in PGF's dividend
reinvestment plan will receive fractional shares, and
(c) PGF stockholders that do not participate in PGF's
dividend reinvestment plan will not receive
fractional shares, rather CLM's transfer agent will
aggregate all fractional shares, sell the resulting
full shares on the AMEX at the then current market
price and remit the proceeds to PGF's stockholders in
proportion to their fractional shares.

A copy of the PGF Plan is attached to this Proxy Statement/Prospectus
as Exhibit A, and the description of the PGF Plan included in this
Prospectus/Proxy Statement is qualified in its entirety by reference to Exhibit
A.

The following provides a more detailed discussion about the PGF Merger,
each Fund and additional information that you may find helpful when considering
your vote on the PGF Merger.

-3-

SYNOPSIS

This summary highlights important information included in this Proxy
Statement/Prospectus. This summary is qualified by reference to the more
complete information included elsewhere in this Proxy Statement/Prospectus and
the PGF Plan. Stockholders of each Fund should read this entire Proxy
Statement/Prospectus carefully.

THE PROPOSED PGF MERGER.

The Boards of Directors of CLM and PGF, including the Non-interested
Directors of each Fund, have unanimously approved the PGF Plan. The PGF Plan
provides for the merger of PGF with and into CLM. As a result of the PGF Merger:

(1) each share of common stock of PGF will convert into an
equivalent dollar amount of full and fractional shares of CLM
common stock based on the relative net asset value per share
of each Fund calculated at the close of business on the
Business Day (as such term is defined in the PGF Plan)
preceding the Effective Date;
(2) stockholders participating in PGF's dividend reinvestment plan
will, on the Effective Date, receive fractional shares;
(3) stockholders that do not participate in PGF's dividend
reinvestment plan will not receive fractional shares, rather
CLM's transfer agent will aggregate all fractional shares,
sell the resulting full shares on the AMEX at the then current
market price and remit the proceeds to PGF's stockholders in
proportion to their fractional shares.

If the PGF Merger is not consummated, each Fund will continue as a
separately managed investment company.

FORM OF ORGANIZATION.

CLM is a closed-end, diversified management investment company and PGF
is a closed-end, non-diversified management investment company, both of which
are registered under the Investment Company Act. CLM and PGF were both organized
as Maryland corporations in 1987 and 1989, respectively. Each Fund's Board of
Directors is responsible for the management of the business and affairs of the
respective Fund.

INVESTMENT OBJECTIVES.

CLM's investment objective is to seek long-term capital appreciation
through investment in equity securities, including common and preferred shares,
of U.S. and non-U.S. companies. PGF seeks total return consisting of capital
appreciation and current income by investing primarily in U.S. and non-U.S.
securities, including common and preferred shares, and debt securities.

Each Fund's investment objective is fundamental, and can only be
changed with the approval of the holders of a majority of the outstanding voting
securities of the Fund, as set forth in Section 2(a)(42) of the Investment
Company Act.

The preceding summary of each Fund's investment objective and certain
policies should be considered in conjunction with the discussion below under
"Risk Factors and Special Considerations" and "Comparison of Investment
Objectives and Policies."

NET ASSETS OF THE FUNDS

At December 31, 2003, CLM had net assets of $26,565,307 and PGF had net
assets of $26,055,912.

-4-

FEES AND EXPENSES--PGF AND CLM

Cornerstone Advisors serves as the investment adviser for both CLM and
PGF. The investment advisory agreements between the Advisor and each Fund are
substantially identical. As compensation for its advisory services, Cornerstone
Advisors is contractually entitled to receive from each Fund an annual fee of
one percent (1.00%) of that Fund's average weekly net assets payable on a
monthly basis. Cornerstone Advisors has implemented a voluntarily fee waiver
with regard to each Fund. Prior to December 31, 2003, the Advisor voluntarily
waived its management fees as to each Fund to the extent that each Fund's
monthly operating expenses exceeded 0.10% of net assets calculated on a monthly
basis (1.20% on an annualized basis). As of January 1, 2004, the Advisor has
agreed to voluntarily waive its management fee to each Fund to the extent that
each Fund's monthly operating expenses exceed 0.125% of net assets calculated on
a monthly basis (1.5% on an annualized basis) (the "Current Fee Waiver"). The
Advisor has informed each Fund's Board of Directors that in the event that the
PGF Merger is approved by each Fund's stockholders, the Advisor will
contractually waive its fees to the extent that the surviving Fund's monthly
operating expenses exceed 0.10% of net assets calculated on a monthly basis
("Post Merger Fee Waiver"). The contractual fee waiver is subject to the Board's
approval at the next regularly scheduled meeting and will be in effect until
December 31, 2004, but may be renewed thereafter upon the consent of Cornerstone
Advisors and the Board of Directors. While the expenses of the proposed PGF
Merger are generally not regarded as "operating expenses," Cornerstone Advisors
has stated that it will include the expenses of the PGF Merger as part of the
"operating expenses," and thus they will be included in the fee waiver
calculation to the benefit of shareholders.

For the year ended December 31, 2003, Cornerstone Advisors earned
$246,113 and $240,927 for performing its advisory services to CLM and PGF,
respectively. The Advisor voluntarily waived $82,098 and $96,295 of its fees for
CLM and PGF, respectively, under the Advisor's annualized fee waiver of 1.20%.

BSFM serves as PGF's and CLM's administrator. PGF and CLM each pay BSFM
a monthly fee that is computed weekly at an annual rate of 0.10% of the
respective Fund's average weekly net assets, subject to a minimum annual fee of
$50,000. In addition to the fee, the Fund is required to reimburse BSFM all
out-of-pocket expenses incurred by it for attendance at any meetings (outside
the New York metropolitan area) of the Board of Directors, or any committees of
such Board, or any other meetings or presentations for which it is required to
attend. For the year ended December 31, 2003, BSFM earned $50,000 from each Fund
for services performed.

Based on net assets at December 31, 2003, and projected expenses for
the year 2004, in the absence of a fee waiver, each of CLM's and PGF's
annualized expense ratio would be expected to be approximately 1.48% and 1.51%,
respectively. Based on similar assumptions, CLM's annualized expense ratio after
the PGF Merger, not including the expenses of the PGF Merger, is projected to be
approximately 1.41%. Assuming the Post Merger Fee Waiver is in effect, CLM's
annualized expense ratio is expected to be 1.20%. Based on similar assumptions,
CLM's annualized expense ratio after the PGF and MGC Mergers, not including the
expenses of either merger, are projected to be approximately 1.25%, assuming the
Post Merger Fee Waiver described above remains in effect, CLM's annualized
expense ratio is expected to be 1.20%. The actual expense ratios for the
calendar year, whether or not the PGF Merger or the MGC Merger occur, may be
higher or lower than these projections and depend upon performance, general
stock market and economic conditions, net asset levels, stock prices and other
factors, as well as whether the voluntary fee waiver is continued.

See "Expense Table" below for the current expenses of each Fund and pro
forma expenses following the proposed mergers.

-5-

DISTRIBUTION POLICIES

On June 25, 2002, each Fund's Board of Directors adopted a fixed,
monthly distribution policy, pursuant to which CLM and PGF made fixed, monthly
distributions to their respective stockholders equal to $0.0825 and $0.2675 per
share, respectively. At separate Board Meetings held on September 24, 2003, each
respective Board met and approved an increase in the amount of the fixed,
monthly distribution. Currently, CLM pays out $0.087 per share and PGF pays out
$0.282 per share on a monthly basis. To the extent that these distributions
exceed the current earnings of a Fund, the balance is generated from sales of
portfolio securities held by the Fund and may be considered returns of capital.

The Board of Directors of each Fund has reserved the right to change
the dollar amount of the monthly distribution, but has indicated the intention
to maintain the total amount of distributions at or above this level. The Board
continues to believe that the distribution policy is in the best interests of
each Fund and its stockholders, and it is the intention of the Board to continue
such distribution policy so long as the Board continues to believe that it is in
the best interest of the respective Fund and its stockholders.

FEDERAL INCOME TAX CONSEQUENCES OF THE PGF MERGER.

As a condition to the closing of the PGF Merger, each Fund will receive
an opinion of Blank Rome LLP, counsel to each Fund, stating that the PGF Merger
will constitute a tax-free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").

Accordingly, CLM, PGF, CLM stockholders, and PGF stockholders that
participate in the PGF dividend reinvestment plan will not recognize any
substantial gain or loss as a result of the PGF Merger. However, PGF
stockholders that do not participate in the PGF dividend reinvestment plan and
receive cash in lieu of the fractional shares may recognize some gain. The
holding period and the aggregate tax basis of CLM shares (including fractional
shares) received by a PGF stockholder will be the same as the holding period and
aggregate tax basis of the shares of PGF previously held by the stockholder. The
holding period and the aggregate tax basis of the assets received by CLM in the
PGF Merger will be the same as the holding period and the tax basis of such
assets in the hands of PGF immediately before the PGF Merger. For more
information about the tax consequences of the PGF Merger, see "Information about
the PGF Merger - Tax Considerations and Consequences of the Merger."

UNREALIZED CAPITAL GAINS/LOSSES

As of December 31, 2003, CLM had $2,114,454 in net unrealized capital
gains representing 7.95% of net assets, and PGF had $(3,208,171) in net
unrealized capital losses representing 12.31% of net assets.

EXPENSES OF THE PGF MERGER.

In evaluating the proposed PGF Merger, the Board of Directors of each
Fund have estimated the amount of expenses CLM and PGF would incur to be
approximately $86,000 and $70,000, respectively, which includes, but is not
limited to, AMEX fees, SEC registration fees, legal and accounting fees, proxy
and distribution costs, and expenses incurred in connection with the PGF Merger.
Some of these expenses represent expenses that would have been incurred by each
Fund in holding their respective annual meetings. Each Fund will bear its
respective costs of the PGF Merger, however, to the extent that any of the
expenses incurred relate specifically to actions taken as a result of the PGF
Merger, such as SEC registration fees and AMEX listing fees, such expenses will
be allocated on the basis of relative net assets of all of the Funds. As
discussed above under "Fees and Expenses - PGF and CLM," Cornerstone Advisors
has stated that merger expenses will be included in the calculation of their
contractual fee waiver, to the benefit of shareholders.

PRINCIPAL RISK FACTORS

Both CLM and PGF are closed-end management investment companies and are
designed primarily for long-term investors and not as trading vehicles.

STOCK MARKET VOLATILITY. Stock markets can be volatile. In other words,
the prices of stocks can rise or fall rapidly in response to developments
affecting a specific company or industry, or to changing economic, political or
market conditions. Each Fund is subject to the general risk that the value of
its investments may decline if the stock markets perform poorly. There is also a
risk that each Fund's investments will underperform either the securities
markets generally or particular segments of the securities markets.

-6-

ISSUER SPECIFIC CHANGES. Changes in the financial condition of an
issuer, changes in the specific economic or political conditions that affect a
particular type of security or issuer, and changes in general economic or
political conditions can affect the credit quality or value of an issuer's
securities. Lower-quality debt securities tend to be more sensitive to these
changes than higher-quality debt securities.

INTEREST RATE RISK. Debt securities have varying levels of sensitivity
to changes in interest rates. In general, the price of a debt security can fall
when interest rates rise and can rise when interest rates fall. Securities with
longer maturities and mortgage securities can be more sensitive to interest rate
changes although they usually offer higher yields to compensate investors for
the greater risks. The longer the maturity of the security, the greater the
impact a change in interest rates could have on the security's price. In
addition, short-term and long-term interest rates do not necessarily move in the
same amount or the same direction. Short-term securities tend to react to
changes in short-term interest rates and long-term securities tend to react to
changes in long-term interest rates.

CREDIT RISKS. Fixed income securities rated B or below by S&Ps or
Moody's may be purchased by either Fund. These securities have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity of those issuers to make principal or
interest payments, as compared to issuers of more highly rated securities.

EXTENSION RISK. Each Fund is subject to the risk that an issuer will
exercise its right to pay principal on an obligation held by that Fund (such as
mortgage-backed securities) later than expected. This may happen when there is a
rise in interest rates. These events may lengthen the duration (i.e. interest
rate sensitivity) and potentially reduce the value of these securities.

ILLIQUID SECURITIES. Each Fund may invest up to 15% of its respective
net assets in illiquid securities. Illiquid securities may offer a higher yield
than securities which are more readily marketable, but they may not always be
marketable on advantageous terms. The sale of illiquid securities often requires
more time and results in higher brokerage charges or dealer discounts than does
the sale of securities eligible for trading on national securities exchanges or
in the over-the-counter markets. A security traded in the U.S. that is not
registered under the Securities Act will not be considered illiquid if Fund
management determines that an adequate investment trading market exists for that
security. However, there can be no assurance that a liquid market will exist for
any security at a particular time.

INVESTMENT IN SMALL AND MID-CAPITALIZATION COMPANIES. Each Fund may
invest in companies with mid or small sized capital structures (generally a
market capitalization of $5 billion or less). Accordingly, each Fund may be
subject to the additional risks associated with investment in these companies.
The market prices of the securities of such companies tend to be more volatile
than those of larger companies. Further, these securities tend to trade at a
lower volume than those of larger more established companies. If a Fund is
heavily invested in these securities and the value of these securities suddenly
declines, that Fund will be susceptible to significant losses.

OVER-THE-COUNTER BULLETIN BOARD MARKETS. Each Fund may invest in
companies whose stock is trading on the over-the-counter Bulletin Board which
have only a limited trading market. A more active trading market may never
develop. Each Fund may be unable to sell its investments in these companies on
any particular day due to the limited trading market.

ANTI-TAKEOVER PROVISIONS. Each Fund's Charter and Bylaws include
provisions that could limit the ability of other persons or entities to acquire
control of the Fund or to cause it to engage in certain transactions or to
modify its structure.

-7-

LEVERAGE RISK. Utilization of leverage is a speculative investment
technique and involves certain risks to the holders of common stock. These
include the possibility of higher volatility of the net asset value of the
common stock and potentially more volatility in the market value of the common
stock. So long as each Fund is able to realize a higher net return on its
investment portfolio than the then current cost of any leverage together with
other related expenses, the effect of the leverage will be to cause holders of
common stock to realize higher current net investment income than if the Fund
were not so leveraged. On the other hand, to the extent that the then current
cost of any leverage, together with other related expenses, approaches the net
return on the Fund's investment portfolio, the benefit of leverage to holders of
common stock will be reduced, and if the then current cost of any leverage were
to exceed the net return on the Fund's portfolio, the Fund's leveraged capital
structure would result in a lower rate of return to Common Shareholders than if
the Fund were not so leveraged. There can be no assurance that each Fund's
leverage strategy will be successful.

FOREIGN SECURITIES RISK. Investments in securities of non-U.S. issuers
involve special risks not presented by investments in securities of U.S.
issuers, including the following: less publicly available information about
companies due to less rigorous disclosure or accounting standards or regulatory
practices; the impact of political, social or diplomatic events; possible
seizure, expropriation or nationalization of the company or its assets; and
possible imposition of currency exchange controls. These risks are more
pronounced to the extent that each Fund invests a significant amount of its
investments in companies located in one region.

DEBT SECURITY RISK. In addition to interest rate risk, call risk and
extension risk, debt securities are also subject to the risk that they may also
lose value if the issuer fails to make principal or interest payments when due,
or the credit quality of the issuer falls.

COMMON STOCK RISK. While common stock has historically generated higher
average returns than fixed income securities, common stock has also experienced
significantly more volatility in those returns. An adverse event, such as an
unfavorable earnings report or acts of terrorism, may depress the value of
common stock held by the Fund. Also, the price of common stock is sensitive to
general movements in the stock market. A drop in the stock market may depress
the price of common stock held by the Fund.

MARKET DISCOUNT FROM NET ASSET VALUE. Shares of closed end investment
companies frequently trade at a discount from their net asset value. This
characteristic is a risk separate and distinct from the risk that a Fund's net
asset value could decrease as a result of its investment activities and may be
greater for investors expecting to sell their shares in a relatively short
period following completion of this offering. The net asset value of the common
stock will be reduced immediately following the offering as a result of the
payment of certain offering costs. Whether investors will realize gains or
losses upon the sale of the common stock will depend not upon the Fund's net
asset value but entirely upon whether the market price of the common stock at
the time of sale is above or below the investor's purchase price for the common
stock. Because the market price of the common stock will be determined by
factors such as relative supply of and demand for the common stock in the
market, general market and economic conditions, and other factors beyond the
control of the Fund, the Fund cannot predict whether the common stocks will
trade at, below or above net asset value. As of December 31, 2003, each of CLM
and PGF were trading at substantial premiums to their net asset value, 32.35%
and 32.91%, respectively.

As a stockholder, you may pay certain fees and expenses if you hold
shares of CLM, PGF or MGC, or in CLM-Post PGF Merger, in CLM-Post MGC Merger, or
in CLM-Post the combined PGF and MGC Mergers. These fees and expenses, including
fees and expenses based on a pro forma basis, post the mergers are set forth in
the table below and the example that follows.

-8-

EXPENSE TABLE

CLM Pro Forma,
CLM Pro CLM Pro Post PGF and MGC
Forma, Post Forma, Post Mergers Combined
PGF Merger MGC Merger
PGF CLM MGC only Only
----------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION
EXPENSES

ANNUAL EXPENSES(1)
Investment Advisory

Fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Other Expenses(2)
0.51% 0.48% 1.13% 0.41% 0.27% 0.25%
TOTAL ANNUAL EXPENSES

1.51%(3) 1.48%(3) 2.13% 1.41%(4) 1.27%(4) 1.25%(4)
===== ===== ===== ===== ===== =====

(1) The percentages in the above table expressing annual fund operating
expenses are based on each Fund's operating expenses for the fiscal
period ended December 31, 2003.
(2) Other Expenses include administration, fund accounting, custody and
transfer agency fees as well as legal and auditing annual expenses.
These figures do not reflect the expenses of the PGF Merger, the MGC
Merger, or of the combined mergers.
(3) Total Annual Expenses does not reflect the effect of Cornerstone
Advisors Current Fee Waiver of 1.50% on an annualized basis. Assuming
that the contractual Post Merger Fee Wavier continues, the Total Annual
Expenses are expected to be 1.20%.
(4) Total Annual Expenses does not reflect the effect of any fee waiver.
Assuming that the contractual Post Merger Fee Waiver is in effect, the
Total Annual Expenses are expected to be 1.20%.

Example. The purpose of the following example is to help you understand
the costs and expenses you may bear, directly or indirectly, as an investor.
This example is based on the level of total annual operating expenses for each
Fund listed in the table above, the total expenses relating to a $10,000
investment, assuming a 5% annual return and reinvestment of all dividends and
distributions. Stockholders do not pay these expenses directly, they are paid by
the Funds before they distribute net investment income to stockholders. This
example should not be considered a representation of future expenses, and actual
expenses may be greater or less than those shown. Federal regulations require
the example to assume a 5% annual return, but actual annual returns will vary.

Pro Forma, Post Pro Forma, Post Pro Forma, Post PGF
PGF Merger MGC Merger and MGC Mergers
YEARS PGF CLM MGC Combined
---------------------------------------------------------------------------------------------------

1 $154 $151 $216 $144 $129 $127
3 $477 $468 $667 $446 $403 $397
5 $824 $808 $1,144 $771 $697 $686
10 $1,802 $1,768 $2,462 $1,691 $1,534 $1,511

FINANCIAL HIGHLIGHTS

The information required in this portion is being incorporated by
reference from each Fund's Annual Report to Stockholders filed with the SEC.
This information was audited by Tait, Weller & Baker, each Fund's independent
auditors, whose reports, along with each Fund's financial statements, are
incorporated herein by reference and included in each Fund's Annual Report to
Stockholders. Each of the Fund's Annual Report and Semi-Annual Report may be
obtained without charge, by writing to the Secretary of the Fund c/o Bear
Stearns Funds Management Inc., 383 Madison Avenue, 23 Fl., New York, New York
10179, or by calling 1-800-837-2755.

-9-

COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES

ORGANIZATION.

CLM is a closed-end, diversified management investment company
registered under the Investment Company Act. CLM was incorporated in Maryland on
May 1, 1987 and commenced operations on June 30, 1987. PGF is a closed-end,
non-diversified management investment company registered under the Investment
Company Act. PGF was incorporated on August 11, 1989 and commenced operations on
November 9, 1989. Each Fund is managed and advised by Cornerstone Advisors. The
shares of common stock of each Fund are listed and trade on the AMEX under the
symbols "CLM" and "PGF", respectively. After the PGF Merger, CLM's shares will
continue to trade on the AMEX under the symbol "CLM", while PGF's shares will be
delisted and PGF will cease to exist.

The shares of common stock of each Fund have equal non-cumulative
voting rights and equal rights with respect to dividends, assets and
dissolution. Each Fund's shares of common stock are fully paid and
non-assessable and have no preemptive, conversion or other subscription rights.
Fluctuations in the market price of each Fund's shares is the principal
investment risk of an investment in either Fund. Portfolio management, market
conditions, investment policies and other factors affect such fluctuations.
Although the investment objectives, policies and restrictions of each Fund are
similar, there are differences between them, as discussed below. There can be no
assurance that either Fund will achieve its stated investment objective.

INVESTMENT OBJECTIVES.

CLM

CLM's investment objective is to seek long-term capital appreciation
through investment primarily in equity securities of U.S. and non-U.S. companies
which Fund management believes have demonstrated fundamental investment value
and favorable growth prospects, as determined by the Advisor. In general, CLM
invests primarily in common stocks, preferred stocks, rights, warrants and
securities convertible into common stocks that are listed on stock exchanges or
traded over the counter.

PGF

PGF's investment objective is to seek total return consisting of
capital appreciation and current income by investing primarily all of its assets
in equity securities of U.S. and non-U.S. companies and U.S. dollar denominated
debt securities which Fund management believes demonstrated fundamental
investment value and favorable growth prospects. In general, PGF invests in such
equity securities that are traded in the United States on a securities exchange,
over the counter, or as sponsored American Depository Receipts ("ADRs"), or
other forms of depository receipt, such as International Depository Receipts
("IDR"). Depository receipts are issued with the cooperation of the company
whose stock underlies the ADR. They are traded over an exchange like common
stocks in the United States, and are typically issued in connection with a U.S.
or foreign banks or trust companies and evidence ownership of the underlying
securities issued by a foreign corporation, including voting rights.

Each Fund's foregoing investment objective cannot be changed without
the vote of a majority of the Fund's outstanding voting securities as set forth
in Section 2(a)(42) of the Investment Company Act. No assurance can be given
that either Fund's investment objective will be achieved.

-10-

COMPARISON OF INVESTMENT POLICIES.

CLM

CLM's portfolio, under normal market conditions, will consist
principally of the equity securities of U.S. and non-U.S. companies. In general,
CLM invests primarily in common stocks, preferred stocks, rights, warrants and
securities convertible into common stocks that are listed on stock exchanges or
traded over the counter. The Fund may, without limitation, hold cash or invest
in assets in money market instruments, including U.S. and non-U.S. government
securities, high grade commercial paper and certificates of deposit and bankers'
acceptances issued by U.S. and non-U.S. banks having deposits of at least $500
million. In addition, CLM may engage in hedging transactions to reduce its
company market and currency exchange exposure.

Although CLM has the ability to invest a significant portion of its
assets in non-U.S. companies, the Fund has consistently maintained the
investment of at least 95% of its assets in U.S. companies since June 30, 2001.

CLM may also invest up to 10% of its assets in the aggregate in the
securities of other investment companies and up to 5% of its assets in any one
such investment company, provided that such investment does not represent more
than 3% of the voting stock of the acquired investment company of which such
shares are purchased. As a shareholder in a investment company, the Fund will
bear its ratable share of the investment company's expenses and would remain
subject to payment of the Fund's advisory and administrative fees with respect
to the assets so invested.

CLM may invest up to 15% of its assets in illiquid U.S. and non-U.S.
securities, provided that the Fund may not invest more than 3% of the Fund's
assets in the securities of companies that, at the time of investment, had less
than a year of operations, including operations of predecessor companies. The
Fund will invest only in such illiquid securities that, in the opinion of Fund
management, present opportunities for substantial growth over a period of two to
five years.

CLM does not expect to trade in securities for short-term gains. Higher
portfolio turnover rates resulting from more actively traded portfolio
securities generally result in higher transaction costs, including brokerage
commissions and related capital gains or losses. The Fund's investment policies
emphasize long-term investment in the securities of companies, therefore, the
Fund's annual portfolio turnover rate is expected to be relatively low, ranging
between 25% and 75%.

CLM's foregoing investment policies may be changed by the Fund's Board
of Directors without shareholder vote.

PGF

PGF's portfolio, under normal market conditions, consists principally
of the equity securities of large, mid and small capitalization companies.
Equity securities in which the Fund may invest include common and preferred
stocks, convertible securities, warrants and other securities having the
characteristics of common stocks, such as ADRs and IDRs. The Fund may, however,
invest a portion of its assets in U.S. dollar denominated debt securities when
Fund management believes that it is appropriate to do so in order to achieve the
Fund's investment objective - for example when interest rates are high in
comparison to anticipated returns on equity investments. Debt securities in
which the Fund may invest include U.S. dollar denominated bank, corporate or
government bonds, notes, and debentures of any maturity determined by Fund
management to be suitable for investment by the Fund. The Fund may invest in the
securities of issuers that it determines to be suitable for investment by the
Fund regardless of their rating. The Fund may not, however, invest more than 5%
of its assets in debt securities that are determined by Fund management to be
rated or comparable to securities rated B or below by S&P or Moody's.

PGF's management utilizes a balanced approach, including value and
growth investing by seeking out companies at reasonable prices, without regard
to sector or industry, that demonstrate favorable long-term growth
characteristics. Valuation and growth characteristics may be considered for
purposes of selecting potential investment securities. In general in the
securities industry, valuation analysis is used to determine the inherent value
of the company by analyzing financial information such as a company's price to
book, price to sales, return on equity, and return on assets ratios and growth
analysis is used to determine a company's potential for long-term dividends and
earnings growth due to market-oriented factors such as growing market share, the
launch of new products or services, the strength of its management and market
demand.

-11-

PGF may also invest up to 10% of its assets in the aggregate in the
securities of other investment companies and up to 5% of its assets in any one
such investment company, provided that such investment does not represent more
than 3% of the voting stock of the acquired investment company of which such
shares are purchased. As a shareholder in any investment company, the Fund will
bear its ratable share of the investment company's expenses and would remain
subject to payment of the Fund's advisory and administrative fees with respect
to the assets so invested.

PGF may invest up to 15% of its assets in illiquid U.S. and non-U.S.
securities, provided that the Fund may not invest more than 3% of the Fund's
assets in the securities of companies that, at the time of investment, had less
than a year of operations, including operations of predecessor companies. The
Fund will invest only in such illiquid securities that, in the opinion of Fund
management, present opportunities for substantial growth over a period of two to
five years.

PGF does not expect to trade in securities for short-term gains. Higher
portfolio turnover rates resulting from more actively traded portfolio
securities generally result in higher transaction costs, including brokerage
commissions and related capital gains or losses. The Fund's investment policies
emphasize long-term investment in the securities of companies, therefore, the
Fund's annual portfolio turnover rate generally ranges between 25% and 75%.

PGF's foregoing investment policies may be changed by the Fund's Board
of Directors without shareholder vote.

EACH FUND'S NON-PRINCIPAL INVESTMENT POLICIES

Temporary Defensive Positions. Each Fund may, in attempting to respond
to adverse market, economic, political or other conditions, take temporary
defensive positions that are inconsistent with its principal investment
strategies. Such investments include various short-term instruments. If a Fund
takes a temporary defensive position at the wrong time, the position would have
an adverse impact on the Fund's performance and it may not achieve its stated
investment objective.

Securities Lending. Each Fund may lend its portfolio securities to
broker-dealers in amounts equal to no more than 33 1/3% of the Fund's net
assets. These transactions will be fully collateralized at all times with cash
and/or high quality, short-term debt obligations. These transactions involve
risk to a Fund if the other party should default on its obligation and the Fund
is delayed or prevented from recovering the securities lent. In the event the
original borrower defaults on its obligation to return lent securities, the Fund
will seek to sell the collateral, which could involve costs or delays. To the
extent proceeds from the sale of collateral are less than the repurchase price,
the Fund would suffer a loss and you could lose money on your investment.

Borrowing. Each Fund may borrow money from banks for temporary or
emergency purposes or for the clearance of transactions in amounts not exceeding
10% (taken at the lower of cost or current value) of its total assets (not
including the amount borrowed) and may also pledge its assets to secure such
borrowings. To reduce its indebtedness, a Fund may have to sell a portion of its
investments at a time when it may be disadvantageous to do so. In addition,
interest paid by the Fund on borrowed funds would decrease the net earnings of
the Fund

Repurchase Agreements. Each Fund may enter into repurchase agreements
collateralized by the securities in which it may invest. A repurchase agreement
involves the purchase by the Fund of securities with the condition that the
original seller (a bank or broker-dealer) will buy back the same securities
(collateral) at a predetermined price or yield. Repurchase agreements involve
certain risks not associated with direct investments in securities. In the event
the original seller defaults on its obligation to repurchase, the Fund will seek
to sell the collateral, which could involve costs or delays. To the extent
proceeds from the sale of collateral are less than the repurchase price, the
Fund would suffer a loss.

-12-

Under the Investment Company Act, neither Fund may:

(1) invest more than 5% of its total assets in the securities of
any one investment company, nor
(2) acquire more than 3% of the outstanding voting securities of
any such company.

UNITED STATES FEDERAL INCOME TAXES

The following is a brief summary of certain United States federal
income tax issues that apply to each Fund. Stockholders should consult their own
tax advisers with regard to the federal tax consequences of the purchase,
ownership and disposition of each Fund's shares, as well as tax consequences
arising under the laws of any state, foreign country, or other taxing
jurisdiction.

Each Fund has qualified, and intends to continue to qualify and elect
to be treated, as a regulated investment company ("RIC"), for each taxable year
under Subchapter M of the Code. A RIC generally is not subject to federal income
tax on income and gains distributed in a timely manner to its stockholders.

Each Fund intends to distribute annually to its stockholders
substantially all of its investment company taxable income. The Board of
Directors of each Fund will determine annually whether to distribute any net
realized long-term capital gains in excess of net realized short-term capital
losses, including any capital loss carryovers. Each Fund currently expects to
distribute any excess annually to their stockholders. However, if either Fund
retains for investment an amount equal to its net long-term capital gains in
excess of its net short-term capital losses and capital loss carryovers, it will
be subject to a corporate tax, currently at a rate of 35%, on the amount
retained. In that event, that Fund expects to designate such retained amounts as
undistributed capital gains in a notice to its stockholders who:

(1) will be required to include in income for United States
federal income tax purposes, as long-term capital gains, their
proportionate shares of the undistributed amount;
(2) will be entitled to credit their proportionate shares of the
35% tax paid by that Fund on the undistributed amount against
their United States federal income tax liabilities, if any,
and to claim refunds to the extent their credits exceed their
liabilities, if any; and
(3) will be entitled to increase their tax basis, for United
States federal income tax purposes, in their shares by an
amount equal to 65% of the amount of undistributed capital
gains included in the stockholder's income.

Income received by a Fund from sources within countries other than the
United States may be subject to withholding and other taxes imposed by such
countries, which will reduce the amount available for distribution to
stockholders. If more than 50% of the value of either Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, that
Fund will be eligible and intends to elect to "pass-through" to stockholders the
amount of foreign income and similar taxes it has paid. Pursuant to this
election, stockholders of the electing Fund will be required to include in gross
income (in addition to the full amount of the taxable dividends actually
received) their pro rata share of the foreign taxes paid by that Fund. Each such
stockholder will also be entitled either to deduct (as an itemized deduction)
its pro rata share of foreign taxes in computing its taxable income or to claim
a foreign tax credit against its U.S. federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a stockholder who
does not itemize deductions, but such a stockholder may be eligible to claim the
foreign tax credit. The deduction for foreign taxes is not allowable in
computing alternative minimum taxable income. Each stockholder will be notified
within 60 days after the close of that Fund's taxable year whether the foreign
taxes paid by the Fund will "pass through" for that year.

-13-

foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit), including the foreign source
passive income passed through by each Fund. Because of the limitation,
stockholders taxable in the United States may be unable to claim a credit for
the full amount of their proportionate share of the foreign taxes paid by each
Fund. The foreign tax credit also cannot be used to offset more than 90% of the
alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals.

Stockholders will be notified annually by each Fund as to the United
States federal income tax status of the dividends, distributions and deemed
distributions made by the Fund to its stockholders. Furthermore, stockholders
will also receive, if appropriate, various written notices after the close of
each Fund's taxable year regarding the United States federal income tax status
of certain dividends, distributions and deemed distributions that were paid, or
that are treated as having been paid, by that Fund to its stockholders during
the preceding taxable year. For a more detailed discussion of tax matters
affecting each Fund and its stockholders, see "Taxation" in the SAI.

INFORMATION ABOUT THE MERGER

GENERAL.

Under the PGF Plan, PGF will merge with and into CLM on the Effective
Date. As a result of the PGF Merger and on the Effective Date:

(1) PGF will no longer exist; and
(2) CLM will be the surviving corporation and PGF will then:
(a) deregister as an investment company under the
Investment Company Act,
(b) withdraw from registration under the Securities
Exchange Act of 1934 (the "Exchange Act"),
(c) remove its shares of common stock from listing on the
AMEX, and
(d) cease its separate existence under Maryland law.

Each share of common stock of PGF will convert into an equivalent
dollar amount of full and fractional shares of CLM common stock, based on the
relative net asset value per share of each Fund calculated at the close of
business on the Business Day preceding the Effective Date. CLM full and
fractional shares will be issued to all of the PGF stockholders. PGF
stockholders that participate in PGF's dividend reinvestment plan will receive
fractional shares. Any PGF stockholder that does not participate in PGF's
dividend reinvestment plan will not receive fractional shares, rather CLM's
transfer agent will aggregate all fractional shares, sell the resulting full
shares on the AMEX at the then current market price and remit the proceeds to
PGF's stockholders in proportion to their fractional shares.

Under Section 3-202 of the MGCL, stockholders of a corporation whose
shares are traded publicly on a national securities exchange, such as the Funds'
shares, are not entitled to demand the fair value of their shares upon a merger;
therefore, the stockholders of the Funds will be bound by the terms of the PGF
Merger. However, any stockholder of either Fund may sell his or her shares of
common stock at any time prior to the PGF Merger on the AMEX.

The PGF Plan may be terminated and the PGF Merger abandoned, whether
before or after approval by the Funds' stockholders, at any time prior to the
Effective Date (i) by the mutual written consent of the Board of Directors of
each Fund, or (ii) by either Fund's Board of Directors if the conditions to that
Fund's obligations under the PGF Plan have not been satisfied or waived.

If the PGF Merger has not been consummated by July 30, 2004, the PGF
Plan automatically terminates on that date, unless a later date is mutually
agreed upon by the Board of Directors of each Fund.

-14-

REASONS FOR THE PGF MERGER.

The Board of Directors of each Fund including, all of the
Non-Interested Directors, considered the proposed PGF Merger at separate
meetings of each Board held on January 30, 2004 and February 20, 2004 and
unanimously approved the proposed PGF Merger at separate meetings of each Board
held on February 20, 2004. For the reasons discussed below, the Board of
Directors of each Fund, including the Non-interested Directors of the Funds,
after consideration of the potential benefits of the PGF Merger to the
stockholders of each Fund and the expenses expected to be incurred by each Fund
in connection therewith, unanimously determined that:

(1) the interests of the existing stockholders of each Fund will
not be diluted as a result of the proposed PGF Merger; and
(2) the proposed PGF Merger is in the best interests of each Fund
and its stockholders.

The reasons stated above were fully recorded in each Fund's minute
books.

Two principal factors led the Boards to reach these conclusions: (i)
the PGF Merger will create a larger Fund and, consequently, all other factors
being equal, should result in an expense ratio that is lower than the current
expense ratio of either Fund absent the voluntary fee waiver; and (ii) the
larger Fund should provide better market liquidity for stockholders who want to
sell their shares or add to their holdings. The Boards believe that, all other
things being equal, a lower expense ratio and better market liquidity for the
shares would be a beneficial result to the surviving Fund.

IN THE JUDGMENT OF THE BOARD OF DIRECTORS OF EACH FUND, THE PGF MERGER SERVES
THE BEST INTERESTS OF EACH FUND AND ITS STOCKHOLDERS.

Stockholders should note that the Boards of Directors of the two Funds
are identical, therefore, although the Non-interested Directors are
"non-interested" with respect to each of the Funds under the Investment Company
Act, they are not at arm's-length with respect to the proposed PGF Merger.

The Board of Directors of each Fund, in declaring advisable and
recommending the proposed PGF Merger, also considered the following:

(1) the capabilities and resources of Cornerstone Advisors in the
area of investment management;
(2) the experience of Cornerstone Advisors in managing an
investment company that has implemented a fixed monthly
distribution policy;
(3) expense ratios and information regarding fees and expenses of
the Funds, both currently and on a pro forma basis after the
PGF Merger;
(4) the terms and conditions of the PGF Merger and whether it
would result in dilution of the interests of each Fund and its
existing stockholders;
(5) the compatibility of each Fund's portfolio securities,
investment objective, policies and restrictions; (6) the tax
consequences to each Fund and its stockholders in connection
with the PGF Merger; and (7) the anticipated expenses of the
PGF Merger.

In reviewing issues relating to the structure of the PGF Merger and the
selection of the surviving corporation in the PGF Merger, each Board also
considered information provided to them by Cornerstone Advisors concerning:

(1) the comparative performance records of the two Funds;
(2) public and market perception of the two Funds;
(3) the relative size of the two Funds;
(4) the investment policies, strategies and personnel Cornerstone
Advisors intends to utilize in managing the surviving Fund;
(5) Cornerstone Advisors' recommendation that CLM be the surviving
corporation; and
(6) the relative tax positions of the Funds.

-15-

TERMS OF THE PGF MERGER AGREEMENT.

The following is a summary of the significant terms of the PGF Plan.
This summary is qualified in its entirety by reference to the PGF Plan, attached
hereto as Exhibit A.

Each share of common stock of PGF will convert into an equivalent
dollar amount of full and fractional shares of CLM common stock based on the
relative net asset value per share of each Fund calculated at the close of
business on the Business Day (as defined in the PGF Plan) preceding the
Effective Date. CLM full and fractional shares will be issued to all of the PGF
stockholders. PGF stockholders that participate in PGF's dividend reinvestment
plan will receive fractional shares. Any PGF stockholder that does not
participate in PGF's dividend reinvestment plan will not receive fractional
shares, rather CLM's transfer agent will aggregate all fractional shares, sell
the resulting full shares on the AMEX at the then current market price and remit
the proceeds to PGF's stockholders in proportion to their fractional shares.

For purposes of valuing assets in connection with the PGF Merger, the
assets of PGF will be valued pursuant to the principles and procedures
consistently utilized by CLM, which principles and procedures are also utilized
by PGF in valuing its own assets and determining its own liabilities. As a
result, it is not expected that CLM's valuation procedures as applied to PGF's
portfolio securities will result in any difference from the valuation that would
have resulted from the application of PGF's valuation procedures to such
securities. The net asset value per share of CLM common stock will be determined
in accordance with these principles and procedures, and CLM will certify the
computations involved. The net asset value per share of each Fund will not be
adjusted to take into account differences in unrealized gains and losses, nor
will it be adjusted to take into account the potential value of tax loss
carryforwards.

CLM will issue separate certificates or share deposit receipts for CLM
common stock to stockholders of PGF. CLM will deliver these certificates or
share deposit receipts representing shares of CLM common stock to American Stock
Transfer & Trust Co., as the transfer agent and registrar for CLM common stock.
CLM will not permit any PGF stockholder to receive new certificates representing
shares of CLM common stock until the stockholder has surrendered his or her
outstanding certificates representing shares of the common stock of PGF or, in
the event of lost certificates, posted adequate bond. PGF will request its
stockholders to surrender their outstanding certificates representing shares of
the common stock of PGF or post adequate bond therefor. Distributions payable to
holders of record of shares of CLM as of any date after the Effective Date and
prior to the exchange of certificates by any stockholder of PGF will be paid to
such stockholder, without interest; however, such distributions will not be paid
unless and until such stockholder surrenders his or her stock certificates of
PGF for exchange.

PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. UPON
CONSUMMATION OF THE PGF MERGER, STOCKHOLDERS OF PGF WILL BE FURNISHED WITH
INSTRUCTIONS FOR EXCHANGING THEIR STOCK CERTIFICATES FOR CLM STOCK CERTIFICATES.

The net asset value of the CLM shares received by PGF stockholders will
be equal to the aggregate net asset value of the PGF shares exchanged.

The PGF Plan provides, among other things, that the PGF Merger will not
take place without (i) the requisite approval of the stockholders of CLM and
PGF, and (ii) the effectiveness of a Registration Statement on Form N-14.

The PGF Plan may be terminated at any time prior to the Effective Date
by mutual agreement of each Fund's Board of Directors or by either Fund if the
other has violated a condition of the PGF Plan. The PGF Plan will automatically
terminate after July 30, 2004 if the PGF Merger has not been consummated, unless
such time is extended by mutual agreement of the Board of Directors of each
Fund.

-16-

The PGF Plan may be amended, modified or supplemented by mutual
agreement of the Boards of Directors of CLM and PGF. However, no amendments
which would have the effect of changing the provisions for determining the
number of shares issued to PGF stockholders will be permitted following the
meeting unless PGF stockholders consent to the amendment.

EXPENSES OF THE PGF MERGER.

In evaluating the proposed PGF Merger, the Board of Directors of each
Fund has estimated the amount of expenses each Fund will incur, including, but
not limited to, AMEX listing fees, SEC registration fees, legal and accounting
fees, proxy and distribution costs, and expenses incurred in connection with the
PGF Merger. The estimated total expenses pertaining to the PGF Merger is
approximately $70,000 for PGF and $86,000 for CLM, such number is inclusive of
the expenses that CLM will incur in connection with the PGF Merger and MGC
Merger. Some of these expenses would have been incurred by each Fund in
connection with their annual meeting of stockholders. Each Fund will bear its
respective costs of the PGF Merger, however, to the extent that any of the
expenses incurred relate specifically to actions taken as a result of the PGF
Merger, such as SEC registration fees and AMEX listing fees, such expenses will
be allocated on the basis of relative net assets of all of the Funds.

The expenses of the PGF Merger, without giving effect to the Current
Fee Waiver, are expected to result in a reduction in net asset value per CLM
share of approximately $0.02, and a reduction in net asset value per PGF share
of approximately $0.06. However, as discussed above, Cornerstone Advisors has
stated that merger expenses will be included in the calculation of their
contractual fee waiver, to the benefit of shareholders.

TAX CONSIDERATIONS AND CONSEQUENCES OF THE MERGER

THE FOLLOWING IS A DISCUSSION OF CERTAIN U.S. FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO PGF STOCKHOLDERS WHO EXCHANGE THEIR SHARES OF
PGF STOCK FOR SHARES OF CLM COMMON STOCK IN THE MERGER. THIS DISCUSSION
ADDRESSES ONLY PGF STOCKHOLDERS WHO ARE U.S. HOLDERS (AS DEFINED BELOW) AND HOLD
PGF STOCK AS A CAPITAL ASSET. IT DOES NOT ADDRESS ALL OF THE U.S. FEDERAL INCOME
TAX CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR PGF STOCKHOLDER IN LIGHT
OF THAT STOCKHOLDER'S INDIVIDUAL CIRCUMSTANCES OR TO A PGF STOCKHOLDER WHO IS
SUBJECT TO SPECIAL RULES, INCLUDING, WITHOUT LIMITATION:

o a financial institution or insurance company;
o a stockholder who is not a U.S. Holder;
o a pass-through entity or an investor in such an entity;
o a dealer or broker in securities or foreign currencies; and
o a stockholder who holds PGF stock as part of a hedge,
appreciated financial position, straddle, constructive sale or
conversion transaction.

The following discussion is based on the Code, applicable
Treasury Regulations, administrative interpretations and court decisions, each
as in effect as of the date of this Proxy Statement/Prospectus and all of which
are subject to change, possibly with retroactive effect. This discussion is not
binding on the Internal Revenue Service, which is referred to as the IRS, and
there can be no assurance that the IRS (or a court, if challenged by the IRS)
will agree with the conclusions stated herein. In addition, this discussion does
not address any state, local or foreign tax consequences of the merger.

-17-

PGF STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.

"U.S. Holder" refers to a beneficial holder of stock that is (i) an
individual citizen or resident of the United States, (ii) a corporation, or
other entity taxable as a corporation for U.S. federal income tax purposes,
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source or (iv) a trust
(x) that is subject to the supervision of a court within the United States and
the control of one or more U.S. persons as described in section 7701(a)(30) of
the Code or (y) that has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a U.S. person.

If a partnership holds PGF stock, the tax treatment of a partner will
generally depend upon the status of the partner and the activities of that
partnership. If a U.S. Holder is a partner of a partnership holding that PGF
stock, the holder is urged to consult its tax advisor regarding the tax
consequences of the merger.

It is a condition to the completion of the merger that PGF and CLM
receive a written opinion from Blank Rome LLP dated as of the effective date of
the merger, to the effect that the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code. The opinion will rely on
certain assumptions as well as representations and covenants made by each of PGF
and CLM. If any of those assumptions, representations or covenants are
inaccurate, Blank Rome may not be able to render the required opinion and the
tax consequences of the merger could differ from those discussed here. An
opinion of counsel is not binding on the IRS or any court, nor does it preclude
the IRS from adopting a contrary position. No ruling has been or will be sought
from the IRS on the U.S. federal income tax consequences of the merger.

Assuming that the merger qualifies as a reorganization within the
meaning of Section 368(a) of the Code, for U.S. federal income tax purposes:

o A PGF stockholder whose shares of PGF stock are exchanged in
the merger for shares of CLM common stock will not recognize
gain or loss, except to the extent of cash, if any, received
in lieu of a fractional share of CLM common stock;

o A PGF stockholder's aggregate tax basis in shares of CLM
common stock received in the merger (including any fractional
share interests deemed to be received and converted to cash)
will equal the aggregate tax basis of the PGF stock
surrendered in the merger; and

o A PGF stockholder's holding period for shares of CLM common
stock received in the merger will include the holding period
for the shares of PGF stock surrendered in the merger.

CASH IN LIEU OF FRACTIONAL SHARES

To the extent that a PGF stockholder receives cash in lieu of
a fractional share of CLM common stock, the stockholder will be deemed to have
received that fractional share in the merger and then to have received the cash
in exchanged for that fractional share. The stockholder will generally recognize
capital gain or loss equal to the difference between the cash received and the
portion of the stockholder's tax basis in the shares of PGF stock surrendered
allocable to that fractional share. This capital gain or loss will generally be
long-term capital gain or loss if the PGF stockholder's holding period for its
shares of PGF stock exceeded one year at the effective time of the merger.

While CLM is not aware of any adverse state or local tax consequences
of the proposed PGF Merger, it has not requested any ruling or opinion with
respect to such consequences and stockholders may wish to consult their own tax
advisers with respect to such matters.

The Board of Directors of each Fund considered the tax loss
carryforward and current capital loss positions of each Fund as part of their
overall process of considering the proposed PGF Merger. They also considered
professional advice that they received regarding the future use of these various
capital loss categories to offset future capital gains. This professional advice
included the possibility that in some circumstances utilization of the capital
loss carryforwards might be restricted, in part because of the PGF Merger. The

-18-

Boards also considered whether the ability to continue to utilize the capital
loss carryforwards should be made a condition to the effectiveness of the PGF
Merger and concluded that it should not. It is believed that the effective
utilization of the large capital loss carryforward of PGF, without triggering
adverse income tax consequences, is more likely if the PGF Merger is approved.
The Boards concluded that in their respective judgments, under all of the facts
and circumstances known to them after considering the advice of their
professional advisers, the PGF Merger is in the best interests of each Fund and
its stockholders, even if as a consequence there may be "truncation"
(restriction on the utilization) of the capital loss carryforwards under the
Code.

ADDITIONAL INFORMATION ABOUT THE FUNDS

DESCRIPTION OF SECURITIES TO BE ISSUED.

The authorized stock of CLM currently consists of twenty-five million
(25,000,000) shares of common stock, U.S. $0.01 par value per share. Shares of
CLM entitle its holders to one vote per share. Holders of CLM's common stock are
entitled to share equally in distributions authorized by the Fund's Board of
Directors payable to the holders of such common stock and in the net assets of
CLM available for distribution to holders of such common stock. Shares have
noncumulative voting rights and no conversion, preemptive or other subscription
rights, and are not redeemable. The outstanding shares of common stock of CLM
are fully paid and non-assessable. In the event of liquidation, each share of
common stock is entitled to its proportion of the Fund's assets after payment of
debts and expenses. CLM holds stockholder meetings annually.

The following table shows information about the common stock of each
Fund as of December 31, 2003.

CLM AMOUNT AUTHORIZED AMOUNT HELD BY FUND AMOUNT OUTSTANDING
----
Common Stock 25,000,000 0 3,849,524
PGF
---
Common Stock 100,000,000 0 1,167,477

As of December 31, 2003, the net asset value of CLM common stock was
$6.90, and the market price per share was $9.00. As of that same date, the net
asset value of PGF common stock was $22.32, and the market price per share was
$29.20.

PREMIUM/DISCOUNT TO NET ASSET VALUE.

Shares of closed-end investment companies frequently trade at a
discount from net asset value. This characteristic is a risk separate and
distinct from the risk that the Funds' net asset values may decrease, and this
risk may be greater for stockholders expecting to sell their shares in a
relatively short period. THE SHARES OF COMMON STOCK OF THE FUNDS SHOULD THUS BE
VIEWED AS BEING DESIGNED PRIMARILY FOR LONG-TERM INVESTORS AND SHOULD NOT BE
CONSIDERED A VEHICLE FOR TRADING PURPOSES.

During the period since the inception of each Fund, the common stock of
both Funds have generally traded at a discount to net asset value, however, as
of June 30, 2003, both CLM and PGF have consistently traded at substantial
premiums. As of the last business day prior to the announcement of the proposed
PGF Merger, each Fund's shares were trading at a premium. It is not possible to
state whether shares of CLM will trade at a premium or discount to net asset
value following the PGF Merger, or the extent of any such premium or discount.

-19-

PER SHARE DATA FOR PROGRESSIVE RETURN FUND, INC.
COMMON STOCK TRADED ON THE AMEX*

Closing MARKET Closing Net
QUARTER ENDED HIGH PRICE LOW PRICE PRICE ASSET VALUE PREMIUM/(DISCOUNT)
------------- ---------- ---------- ------ ----------- ------------------

3/31/02 40.20 27.20 28.04 30.96 (9.43)
6/30/02 28.40 23.35 23.40 24.80 (5.65)
9/30/02 23.30 17.05 17.05 20.13 (15.30)
12/31/02 19.13 17.10 18.95 20.40 (7.11)
3/31/03 21.15 19.01 19.26 19.30 (0.21)
6/30/03 23.35 19.22 23.25 21.08 10.29
9/30/03 25.95 22.93 24.58 20.79 18.23
12/31/03 30.15 24.60 29.20 21.97 32.91
--------------------
* The figures provided from March 31, 2002 through December 31, 2002 are based
on the per share data for the Fund's securities as traded on the NYSE.

PER SHARE DATA FOR CORNERSTONE STRATEGIC VALUE FUND, INC.
COMMON STOCK TRADED ON THE AMEX*
Closing MARKET Closing Net
QUARTER ENDED HIGH PRICE LOW PRICE PRICE ASSET VALUE PREMIUM/(DISCOUNT)
------------- ---------- --------- ----- ----------- ------------------
3/31/02 8.05 7.58 7.65 9.04 (15.38)
6/30/02 7.80 6.57 6.65 7.73 (13.97)
9/30/02 6.53 5.29 5.40 6.22 (13.18)
12/31/02 5.99 5.00 5.88 6.38 (7.84)
3/31/03 6.28 5.40 5.58 6.01 (7.15)
6/30/03 7.35 5.65 7.35 6.54 12.39
9/30/03 7.67 7.15 7.43 6.44 15.37
12/31/03 9.00 7.61 9.00 6.80 32.35
-----------------------
* The figures provided from March 31, 2002 through December 31, 2002, are based
on the per share data for the Fund's securities as traded on the NYSE.

CAPITALIZATION.

The following table shows on an unaudited basis the capitalization of
CLM, PGF and MGC as of December 31, 2003, without giving effect to any fee
waivers in effect during that same period, and on a pro forma basis as of that
same date giving effect to the PGF Merger, the MGC Merger and of the combined
PGF and MGC Mergers:

(in thousands, except per share values)
Pro Forma, Post
Combined PGF
Pro Forma, Post Pro Forma, Post and MGC
PGF CLM MGC PGF Merger* MGC Merger* Mergers*
--- --- --- ----------- ----------- ---------------

Net Assets 26,056 26,565 108,277 52,466 134,576 160,562

Shares of Common
Stock Outstanding
1,167 3,850 9,860 7,627 19,561 23,338

Net Assets Per
Share of Common
Stock 22.32 6.90 10.98 6.88 6.88 6.88

* The Pro Forma Net Assets of CLM Post Merger account for the aggregate cost of
the mergers to the participating Funds.

-20-

DIVIDENDS AND OTHER DISTRIBUTIONS.

Each Fund intends to distribute dividends from its net investment
income and any net realized capital gains after utilization of capital loss
carryforwards annually to prevent application of a federal excise tax. An
additional distribution may be made if necessary. Any dividends or capital gains
distributions declared in October, November or December with a record date in
such a month and paid during the following January will be treated by
stockholders for federal income tax purposes as if received on December 31 of
the calendar year in which it is declared. Dividends and distributions of each
Fund are invested in shares of the Fund at market value and credited to the
stockholder's account on the settlement date which is usually three business
days from the purchase date or, at the stockholder's election, paid in cash.

On June 25, 2002, each Fund's Board of Directors adopted a fixed,
monthly distribution policy, pursuant to which CLM and PGF made regular monthly
distributions equal to $0.0825 and $0.2675 per share, respectively. In
determining to adopt the distribution policies, each Board sought to make
regular monthly distributions at an annualized rate equal to approximately
fifteen percent (15%) of the respective Fund's net asset value. At separate
Board Meetings held on September 24, 2003, each respective Board met and
approved an increase in the amount of the fixed, monthly distribution.
Currently, CLM pays out $0.087 per share and PGF pays out $0.282 per share. The
Board of Directors of each Fund has reserved the right to change the dollar
amount of the monthly distribution, but has indicated the intention to maintain
the total annual amount of the distributions at or above the current level. Such
distributions may be treated as returns of capital, capital gain or ordinary
income depending on each Fund's tax position for the year as a whole.
Stockholders will be advised of the relevant treatment when the tax positions
are known.

It is the intention of the current Board of Directors to continue its
current monthly distribution policy after the PGF Merger at or above current
levels, but there can be no guarantee that the policy will be continued for any
specific time period. In addition, each Fund filed with the SEC a joint
application for exemptive relief seeking relief from the restrictions of Rule
19b-1 promulgated under the Investment Company Act which limits the amount of
capital gains distributions that a RIC may make during a calendar year. There
can be no assurances that such application will be granted by the SEC.

PORTFOLIO VALUATION.

Investments of each Fund are stated at value in each Fund's financial
statements. All securities for which market quotations are readily available are
valued at the last sales price or lacking any sales, at the closing price last
quoted for the securities (but if bid and asked quotations are available, at the
mean between the current bid and asked prices). Securities that are traded
over-the-counter are valued at the mean between the current bid and the asked
prices, if available. All other securities and assets are valued at fair value
as determined in good faith by each Fund's Board of Directors. Short-term
investments having a maturity of 60 days or less are valued on the basis of
amortized cost. The Board of Directors of each Fund has established general
guidelines for calculating fair value of securities that are not readily
marketable. At December 31, 2003, both PGF and CLM held no securities valued in
good faith by the Board of Directors. The net asset value per share of each Fund
is made available to the public on a weekly basis.

-21-

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN.

Each Fund operates a Dividend Reinvestment and Cash Purchase Plan (the
"Program"), sponsored and administered by American Stock Transfer & Trust Co.
(the "Agent"), pursuant to which Fund dividends and distributions, net of any
applicable U.S. withholding tax, are reinvested in shares of the Fund. American
Stock Transfer & Trust Co., serves as the Agent that administers the Program for
the stockholders in the Program.

Stockholders who have shares registered directly in their own names
automatically participate in the respective Fund's Program, unless and until an
election is made to withdraw from the Program on behalf of such participating
stockholder. Stockholders who do not wish to have distributions automatically
reinvested should so notify the Agent at 59 Maiden Lane, New York, New York
10038. Under the Program, each of the Fund's respective dividends and other
distributions to stockholders are reinvested in full and fractional shares as
described below.

When the respective Fund declares an income dividend or a capital gain
or other distribution (each, a "Distribution" and collectively,
"Distributions"), the Agent, on the stockholders behalf, will (i) receive
additional authorized shares from the respective Fund either newly issued or
repurchased from stockholders by the Fund and held as treasury stock ("Newly
Issued Shares") or, (ii) at the sole discretion of the Board of Directors, be
authorized to purchase outstanding shares on the open market, on the AMEX or
elsewhere, with cash allocated to it by the respective Fund ("Open Market
Purchases").

Shares acquired by the Agent in Open Market Purchases will be allocated
to the reinvesting stockholders based on the average cost of such Open Market
Purchases. Alternatively, the Agent will allocate Newly Issued Shares to the
reinvesting stockholders at a price equal to the average closing price of the
respective Fund over the five trading days preceding the payment date of such
Distribution.

Registered stockholders who acquire their shares through Open Market
Purchases and who do not wish to have their Distributions automatically
reinvested should so notify the Fund in writing. If a stockholder has not
elected to receive cash Distributions and the Agent does not receive notice of
an election to receive cash Distributions prior to the record date of any
Distribution, the stockholder will automatically receive such Distributions in
additional shares.

Participants in the Program may withdraw from the Program by providing
written notice to the Agent at least 30 days prior to the applicable
Distribution payment date. When a Participant withdraws from the Program, or
upon termination of the Program as provided below, certificates for whole shares
credited to his/her account under the Program will, upon request, be issued.
Whether or not a participant requests that certificates for whole shares by
issued, a cash payment will be made for any fraction of a share credited to such
account.

The Agent will maintain all stockholder accounts in the Program and
furnish written confirmations of all transactions in the accounts, including
information needed by stockholders for personal and tax records. The Agent will
hold shares in the account of each Program participant in non-certified form in
the name of the participant, and each stockholder's proxy will include those
shares purchased pursuant to the Program. Each participant, nevertheless, has
the right to receive certificates for whole shares owned. The Agent will
distribute all proxy solicitation materials to participating stockholders.

In the case of stockholders, such as banks, brokers or nominees, that
hold shares for others who are beneficial owners participating in the Program,
the Agent will administer the Program on the basis of the number of shares
certified from time to time by the record stockholder as representing the total
amount of shares registered in the stockholder's name and held for the account
of beneficial owners participating in the Program.

All correspondence concerning the Program should be directed to the
Agent at 59 Maiden Lane, New York, New York 10038.

-22-

CORPORATE GOVERNANCE PROVISIONS.

Each Fund is a Maryland corporation and in many respects have similar
charter and by-law provisions.

SPECIAL VOTING PROVISIONS AND REQUIREMENTS.

The Articles of Incorporation and By-laws of each Fund contain
provisions that could have the effect of limiting the ability of other entities
or persons to acquire control of the Fund, to cause it to engage in certain
transactions or to modify its structure.

The affirmative vote of at least sixty-six and two-thirds (66 2/3%) of
the holders of the shares of either of the Funds is required to authorize any of
the following transactions:

(1) merger, consolidation or share exchange of either Fund with or
into any Principal Shareholder (as defined below);
(2) issuance by either Fund of any securities of either Fund to
any Principal Shareholder for cash;
(3) sale, lease, or exchange by either of all or any substantial
part of the assets a Fund to any Principal Shareholder (except
assets having an aggregate fair market value of less than
$1,000,000 aggregating for the purpose of such computation all
assets sold, leased or exchanged in any series of similar
transactions within a twelve-month period); and
(4) the sale, lease or exchange to a Fund, in exchange for
securities of the Fund, of any assets of any Principal
Shareholder (except assets having an aggregate fair market
value of less than $1,000,000 aggregating for the purpose of
such computation all assets sold, leased or exchanged in any
series of similar transactions within a twelve-month period).

Each Fund's By-laws contain provisions the effect of which is to
prevent matters, including nominations of directors, from being considered at
stockholders' meetings where the Fund has not received sufficient prior notice
of the matters.

The Board of Directors of each Fund has determined that the foregoing
voting requirements are in the best interests of Stockholders generally. A
"Principal Shareholder" is defined in each Fund's respective Articles of
Incorporation as any corporation, person or other entity which is the beneficial
owner, directly or indirectly, of more than five percent (5%) of the outstanding
shares of any class of stock of the respective Fund and shall include any
affiliate or associate, as such terms are defined in clause (ii) below, of a
Principal Shareholder. In addition to the shares of stock which a corporation,
person or other entity beneficially owns directly, (a) any corporation, person
or other entity shall be deemed to be the beneficial owner of any shares of
stock of either of the Funds (i) which it has the right to acquire pursuant to
any agreement or upon exercise of conversion rights or warrants, or otherwise
(but excluding stock option granted by the respective Fund), or (ii) which are
beneficially owned, directly or indirectly (including shares deemed owned
through application of clause (i) above), by any other corporation, person or
entity with which it or its "affiliate" or "associate" (as defined below) has
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of stock of either Fund, or which is its
"affiliate" or "associate," as those terms are defined in Rule 12b-2 of the
Exchange Act, and (b) the outstanding shares of any class of stock of either
Fund shall include shares deemed owned through application of clauses (i) and
(ii) above but shall not include any other shares which may be issuable pursuant
to any agreement, or upon exercise of conversions rights or warrants, or
otherwise.

-23-

BY-LAWS.

Each Fund's By-laws provide, among other things, that:

(1) certain advance notice requirements must be met in order for
stockholders to submit proposals at annual meetings and for
nominations by stockholders for election to the Board of
Directors; and
(2) the power to amend the By-laws is reserved to the Board of
Directors, except as otherwise required by the Investment
Company Act.

MANAGEMENT OF THE FUNDS

DIRECTORS AND PRINCIPAL OFFICERS.

The business and affairs of each Fund are managed under the direction
of that Fund's Board of Directors, and the day-to-day operations are conducted
through or under the direction of the officers of that Fund.

Please see Item III - Proposal 4 for a description of the Board of
Directors and the executive officers of CLM, and Item IV - Proposal 2 for a
description of the Board of Directors and the executive officers of PGF.

INVESTMENT ADVISER.

Cornerstone Advisors is the investment adviser to both CLM and PGF
pursuant to investment advisory agreements entered into with each Fund.

Cornerstone Advisors, which has its principal office at One West Pack
Square, Suite 1650, Asheville, North Carolina 28801, was organized in February
of 2001, to provide investment management services to closed-end investment
companies and is registered with the SEC under the Investment Advisers Act.
Cornerstone Advisors is the investment adviser to one other closed-end fund,
Cornerstone Total Return Fund, Inc. Mr. Ralph W. Bradshaw, a Director and
President of PGF and CLM, serves as each Fund's portfolio manager.

Messrs. Ralph W. Bradshaw, Gary A. Bentz and William A. Clark, are the
stockholders of Cornerstone Advisors. Mr. Clark purchased his shares from
Messrs. Bradshaw and Clark in a stock purchase transaction dated December 10,
2003. All three individuals have extensive experience with closed-end investment
companies. Mr. Bradshaw also currently serves as a Director of MGC and Mr. Clark
currently serves as the Chairman of the Board and the President of MGC. Mr.
Bentz served as Treasurer and Vice President of PGF, CLM and Cornerstone Total
Return Fund, Inc. until February 20, 2004.

Cornerstone Advisors has investment discretion for each Fund's assets
subject to the Fund's stated investment policies and the oversight and
supervision of each Fund's respective Board of Directors. Cornerstone Advisors
selects investments for each Fund and places purchase and sale orders on behalf
of the Funds.

ADMINISTRATOR.

BSFM serves as each Fund's administrator pursuant to an administrative
agreement with each Fund. BSFM is located at 383 Madison Avenue, 23rd Floor, New
York, New York 10179.

BSFM provides office facilities and personnel adequate to perform the
following services for each Fund:

-24-

(3) preparation of each Fund's U.S. federal, state and local
income tax returns;
(4) preparation of financial information for each Fund's proxy
statements and semiannual and annual reports to stockholders;
and
(5) preparation of certain of each Fund's reports to the SEC.

As of December 31, 2003, BSFM provided accounting and/or administrative
services for 26 investment companies and investment partnerships, with combined
total assets of approximately $5.7 billion.

CUSTODIAN.

Custodial Trust Company, 101 Carnegie Center, Princeton, New Jersey, is
the custodian for both Funds' assets.

TRANSFER AGENT AND REGISTRAR.

American Stock Transfer & Trust Co., 59 Maiden Lane, New York, New York
10038 acts as the transfer agent and registrar of each Fund.

ESTIMATED EXPENSES.

Except as otherwise provided in the administrative services agreements,
Cornerstone Advisors and BSFM are each obligated to pay expenses associated with
providing the services contemplated by the agreements to which they are parties,
including compensation of and office space for their respective officers and
employees connected with investment and economic research, trading and
investment management and administration of each Fund, as well as the fees of
all directors of each Fund who are affiliated with those companies or any of
their affiliates. Each Fund pays all other expenses incurred in the operation of
that Fund including, among other things:

(1) expenses for legal and independent accountants' services;
(2) costs of printing proxies, stock certificates and stockholder
reports;
(3) charges of the custodians, and the transfer and
dividend-paying agent's expenses in connection with each
Fund's Dividend Reinvestment and Cash Purchase Plan;
(4) fees and expenses of unaffiliated directors;
(5) accounting and pricing costs;
(6) membership fees in trade associations;
(7) fidelity bond coverage for each Fund's officers and employees;
(8) directors' and officers' errors and omissions insurance
coverage;
(9) brokerage costs and stock exchange listing fees and expenses;
(10) taxes; and
(11) other extraordinary or non-recurring expenses and other
expenses properly payable by each Fund.

-25-

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

The following table shows certain information based on filings made
with the SEC concerning persons who may be deemed beneficial owners of 5% or
more of the shares of common stock of either Fund because they possessed or
shared voting or investment power with respect to the shares of that Fund:

PGF Shares of Common Stock
Beneficially Owned
Amount %
NAME AND ADDRESS OF BENEFICIAL OWNER
------------------------------------

Ron Olin Investment Management Company (1)
One West Pack Square
Suite 777
Asheville, NC 28801 462,017 39.8%

Ronald G. Olin (2)
One West Pack Square
Suite 777
Asheville, NC 28801 429,716 37.1%

----------------
(1) The information for PGF is based solely upon information
presented in a Schedule 13G/A, dated January 9, 2004, filed
jointly by Deep Discount Advisors, Inc. and Ron Olin
Investment Management Company.
(2) Based solely upon information presented in a Schedule 13D/A,
dated March 11, 2004, filed by Mr. Olin.

All the directors and executive officers, as a group, of CLM and PGF,
as of December 31, 2003, owned less than 1% of the outstanding shares of the
respective Fund.

EXPERTS

Each Fund's independent auditors are Tait, Weller & Baker, 1818 Market
Street, Suite 2400, Philadelphia, PA 19103. Tait, Weller & Baker audited each
Funds' financial statements for the calendar year ended December 31, 2003.

REQUIRED VOTE

The PGF Merger has been approved by the Board of Directors of each
Fund. Approval of the PGF Merger requires the affirmative vote of the holders of
a majority of the outstanding shares of common stock of each Fund. Therefore an
abstention is equivalent to a vote against the PGF Merger. The Board of
Directors of each Fund recommends that the Stockholders vote in favor of Item I
- Proposal 1.

LEGAL PROCEEDINGS

There are currently no material legal proceedings to which either Fund
is a party.

LEGAL OPINIONS

Certain legal matters in connection with the PGF Merger will be passed
upon for the Funds by Blank Rome LLP.

-26-

ITEM II. MERGER PROPOSAL TO BE VOTED ON BY STOCKHOLDERS OF MGC AND CLM.

PROPOSAL 2:

APPROVAL OF THE MGC MERGER AGREEMENT AND PLAN
OF REORGANIZATION (THE "MGC PLAN")

On January 30, 2004 and February 19, 2004, the MGC Board of Directors,
including a majority of the Non-interested Directors, met and discussed the
proposal to merge MGC with and into CLM (the "MGC Merger"). On January 30, 2004
and February 20, CLM's Board of Directors, including a majority of the
Non-interested Directors, met and discussed the MGC Merger proposal.

At each of the MGC and CLM Board Meetings held on February 19th and
20th , respectively, each Fund's Board:

(1) declared that the merger of MGC with and into CLM is in the
best interest of each Fund and its
stockholders;
(2) declared that in their respective opinions neither Fund's
existing stockholders will be diluted as a result of the MGC
Merger;
(3) approved the MGC Plan; and
(4) recommended that the stockholders of each Fund approve the MGC
Plan.

Stockholders should note that the composition of the Board of Directors
of each Fund is very similar, but not identical, therefore, although all of the
Non-interested Directors are "non-interested" with respect to each Fund a
majority of such Non-interested Directors might not be considered to be at
arms-length with respect to the proposed MGC Merger. The Board of Directors of
each Fund suggests that stockholders carefully review the information contained
in the Proxy Statement/Prospectus before casting a vote.

For more information about the merger, see "Information about the MGC
Merger."

The MGC Plan is subject to the approval of the stockholders of each
Fund and certain other conditions that are explained below. The MGC Plan
provides for the merger of MGC with and into CLM in accordance with the MGCL.

As a result of the MGC Merger:

(1) MGC will no longer exist;
(2) CLM will be the surviving corporation and Cornerstone Advisors
will continue to be the investment adviser of CLM and:

(a) each share of common stock of MGC will convert into
an equivalent dollar amount of full and fractional
shares of common stock of CLM based on the relative
net asset value per share of each Fund calculated at
the close of business on the Business Day (as defined
in the MGC Plan) preceding the Effective Date,
(b) MGC stockholders participating in MGC's dividend
reinvestment plan will receive fractional shares of
CLM common stock based on the relative net asset
value per share of each Fund calculated at the close
of business on the Business Day preceding the
Effective Date,
(c) MGC stockholders that do not participate in MGC's
dividend reinvestment plan will not receive
fractional shares, rather CLM's transfer agent will
aggregate all fractional shares, sell the resulting
shares on the AMEX at the then current market price
and remit the proceeds to MGC's stockholders in
proportion to their fractional shares.

-27-

A copy of the MGC Plan is attached to this Proxy Statement/Prospectus
as Exhibit B, and the description of the MGC Plan included in this
Prospectus/Proxy Statement is qualified in its entirety by reference to Exhibit
B.

The following provides a more detailed discussion about the MGC Merger,
CLM and MGC, and additional information that you may find helpful when
considering your vote on the MGC Merger.

SYNOPSIS

This summary highlights important information included in this Proxy
Statement/Prospectus. This summary is qualified by reference to the more
complete information included elsewhere in this Proxy Statement/Prospectus and
the MGC Plan. Stockholders of CLM and MGC should carefully read the entire Proxy
Statement/Prospectus.

THE PROPOSED MGC MERGER.

The Boards of Directors of each Fund, including the Non-interested
Directors, have approved the MGC Plan. The MGC Plan provides for the merger of
MGC with and into CLM. As a result of the MGC Merger:

(1) each share of common stock of MGC will convert into an
equivalent dollar amount of full and fractional shares of CLM
common stock based on the relative net asset value per share
of each Fund calculated at the close of business on the
Business Day (as defined in the MGC Plan) preceding the
Effective Date;
(2) stockholders of MGC participating in MGC's dividend
reinvestment plan will receive fractional shares of CLM common
stock; and
(3) stockholders that do not participate in MGC's dividend
reinvestment plan will not receive fractional shares, rather
CLM's transfer agent will aggregate all fractional shares,
sell the resulting full shares on the AMEX at the then current
market price and remit the proceeds to MGC's stockholders in
proportion to their fractional shares.

If the MGC Merger is not consummated, each Fund will continue as a
separately managed investment company. As previously announced, Deutsche Asset
Management, Inc. ("DeAM"), MGC's current investment adviser has indicated to the
Board of Directors that it will not seek to renew its investment advisory
agreement with MGC beyond its current term. As a result, in the event that the
MGC Merger is not approved by stockholders, the Board of Directors of MGC will
commence a search for a replacement of DeAM.

FORM OF ORGANIZATION.

CLM and MGC are closed-end, diversified management investment companies
that are registered under the Investment Company Act. Each Fund was organized as
a Maryland corporation in 1987, and each Fund's Board of Directors is
responsible for the management of the business and affairs of the respective
Fund.

INVESTMENT OBJECTIVES.

CLM's investment objective is to seek long-term capital appreciation
through investment in equity securities, including common and preferred shares,
of U.S. and non-U.S. companies. MGC seeks capital appreciation and current
income by investing primarily in common stocks and securities convertible into
common stock, substantially all of which will be U.S. securities.

-28-

NET ASSETS OF THE FUNDS

The net assets at December 31, 2003, of CLM and MGC were $26,565,307
and $108,276,731, respectively.

FEES AND EXPENSES--MGC AND CLM

CLM

For a discussion of the fees and expenses that CLM is subject to,
please see page 5 above.

MGC

DeAM, currently serves as MGC's investment adviser. As compensation for
its advisory services, DeAM is contractually entitled to receive from the Fund
an annual fee of one percent (1.00%) of the Fund's average weekly net assets
payable on a monthly basis. MGC does not currently have an expense reimbursement
limitation nor has DeAM voluntarily implemented a fee waiver.

For the year ended December 31, 2003, DeAM earned $966,400 for
performing its advisory services to MGC.

Prior to September 30, 2003, DeAM also served as MGC's administrator.
For the period beginning on January 1, 2003 and ending on September 30, 2003,
DeAM earned $42,022 for services performed on behalf of MGC.

BSFM currently serves as the administrator to CLM and MGC. Currently,
each Fund pays BSFM a monthly fee that is computed weekly at an annual rate of
0.10% of the respective Fund's average weekly net assets, subject to a minimum
annual fee of $50,000. In addition to the fee, each Fund is required to
reimburse BSFM all out-of-pocket expenses incurred by it for attendance at any
meetings (outside the New York metropolitan area) of the Board of Directors, or
any committees of such Board, or any other meetings or presentations for which
it is required to attend. For the period beginning October 1, 2003 and ending on
December 31, 2003, BSFM earned $26,601 for services performed on behalf of MGC.

If the MGC Merger is approved by each Fund's stockholders, then
Cornerstone Advisors will continue to serve as the investment adviser of CLM.
Cornerstone Advisors informed each Fund's Board of Directors that in the event
that the stockholders of each Fund approve the MGC Merger, the Advisor will
waive its fees to the extent that the surviving Fund's monthly operating
expenses exceed 0.10% of net assets calculated on a monthly basis (1.20% on an
annualized basis) (the "Post Merger Fee Waiver").

Based on net assets at December 31, 2003, and projected expenses for
the year 2004, in the absence of CLM's Current Fee Waiver, as discussed on pages
6-7, above, each of CLM's and MGC's annualized expense ratios are expected to be
approximately 1.48% and 2.13%, respectively. Based on similar assumptions, CLM's
annualized expense ratio after the MGC Merger, not including the expenses of the
MGC Merger, is projected to be approximately 1.27%, assuming that Cornerstone
Advisor's Post Merger Fee Waiver is in effect, CLM's annualized expense ratio is
expected to be 1.20%. Based on similar assumptions, CLM's annualized expense
ratio after the approval of the PGF and MGC Mergers, not including the expenses
of the combined mergers, are projected to be approximately 1.25%, assuming the
Post Merger Fee Waiver described above remains in effect, CLM's annualized
expense ratio is expected to be 1.20%. The actual expense ratios for the
calendar year, whether or not the PGF Merger or the MGC Merger occur, may be
higher or lower than these projections and depend upon performance, general
stock market and economic conditions, net asset levels, stock prices and other
factors, as well as whether the voluntary fee waiver currently in place for CLM
is continued.

-29-

See "Expense Table" below for the current expenses of each Fund and pro
forma expenses following the approvals of the proposed MGC Merger.

DISTRIBUTION POLICIES

CLM

For a discussion regarding CLM's Distribution Policy, please see pages
5-6, above.

MGC

On July 26, 2003, MGC's Board of Directors adopted a distribution
policy whereby the Fund makes fixed, monthly distributions. The amount of the
distributions was set at $0.125 per share for the remaining months of 2003,
subject to the Board's ability to increase the amount of the distribution. On
September 24, 2003, the Board determined to increase the amount of the monthly
distribution to an amount equal to $0.14 per share for remaining calendar months
of 2003 and for the calendar year of 2004. The distributions made pursuant to
the distribution policy may be treated as returns of capital, capital gain or
ordinary income depending on each Fund's tax position for the year as a whole.
Stockholders will be advised of the relevant treatment when the tax positions
are known. To the extent that these distributions exceed the current earnings of
the Fund, the balance is generated from sales of portfolio securities held by
the Fund or returns of capital.

The Board has reserved the right to change the dollar amount of the
monthly distribution, but has indicated the intention to maintain the total
annual amount of distributions at or above this level. The Board continues to
believe that the distribution policy is in the best interests of the Fund and
its stockholders, and it is the intention of the Board to continue such
distribution policy so long as the Board continues to believe that it is in the
best interest of the Fund and its stockholders.

FEDERAL INCOME TAX CONSEQUENCES OF THE MGC MERGER.

As a condition to the closing of the MGC Merger, each Fund will receive
an opinion of Blank Rome LLP, counsel to each Fund, stating that the MGC Merger
will constitute a tax-free reorganization within the meaning of Section 368(a)
of the Code.

Accordingly, CLM, MGC, CLM's stockholders, and MGC stockholders that
participate in the MGC dividend reinvestment plan shall not recognize any gain
or loss as a result of the MGC Merger. However, each MGC stockholder that does
not participate in the MGC dividend reinvestment plan and receives cash in lieu
of fractional shares, may recognize gain. The holding period and the aggregate
tax basis of CLM shares (including fractional shares) received by a MGC
stockholder will be the same as the holding period and aggregate tax basis of
the shares of MGC previously held by the stockholder. The holding period and the
aggregate tax basis of the assets received by CLM in the MGC Merger will be the
same as the holding period and the tax basis of such assets in the hands of MGC
immediately before the MGC Merger. For more information about the tax
consequences of the MGC Merger, see "Information about the MGC Merger - Tax
Considerations and Consequences of the Merger."

UNREALIZED CAPITAL GAINS

As of December 31, 2003, CLM and MGC had $2,114,454 and $25,200,303,
respectively, of net unrealized capital gains, representing 7.95% and 23.27% of
net assets, respectively.

EXPENSES OF THE MGC MERGER.

In evaluating the proposed MGC Merger, the Board of Directors of CLM
and MGC, have estimated the amount of expenses CLM and MGC would incur to be
approximately $86,000 and $180,000, respectively, which includes, but is not
limited to, AMEX fees, SEC registration fees, legal and accounting fees, proxy

-30-

and distribution costs, and expenses incurred in connection with the MGC Merger.
Some of these expenses would have been incurred by each Fund in connection with
the holding of their annual meeting of stockholders. Each Fund will bear its
respective costs of the MGC Merger, however, to the extent that any of the
expenses incurred relate specifically to actions taken as a result of the MGC
Merger, such as SEC registration fees and AMEX listing fees, such expenses will
be allocated on the basis of relative net assets of all of the Funds.

PRINCIPAL RISK FACTORS

Both CLM and MGC are closed-end management investment companies and are
designed primarily for long-term investors and not as trading vehicles.

INVESTMENT IN SMALL AND MID-CAPITALIZATION COMPANIES. Each Fund may
invest in companies with mid or small sized capital structures (for CLM,
generally a market capitalization of $5 billion or less, and for MGC, generally
a market capitalization between $100 million and $2.2 billion), however, MGC
generally invests a much greater percentage of its assets in
small-capitalization companies, and as such, is subject to a greater risk than
CLM. Accordingly, each Fund may be subject to the additional risks associated
with investment in these companies. The market prices of the securities of such
companies tend to be more volatile than those of larger companies. Further,
these securities tend to trade at a lower volume than those of larger more
established companies. If a Fund is heavily invested in these securities and the
value of these securities suddenly declines, that Fund will be susceptible to
significant losses.

EXTENSION RISK. Each Fund is subject to the risk that an issuer will
exercise its right to pay principal on an obligation held by the Fund (such as
mortgage-backed securities) later than expected. This may happen when there is a
rise in interest rates. These events may lengthen the duration (i.e. interest
rate sensitivity) and potentially reduce the value of these securities.

-31-

more time and results in higher brokerage charges or dealer discounts than does
the sale of securities eligible for trading on national securities exchanges or
in the over-the-counter markets. A security traded in the U.S. that is not
registered under the Securities Act of 1933 will not be considered illiquid if
Fund management determines that an adequate investment trading market exists for
that security. However, there can be no assurance that a liquid market will
exist for any security at a particular time.

-32-

factors such as relative supply of and demand for the common stock in the
market, general market and economic conditions, and other factors beyond the
control of the Fund, the Fund cannot predict whether the common stocks will
trade at, below or above net asset value. As of December 31, 2003, each of CLM
and MGC were trading at substantial premiums to their net asset value, 32.35%
and 13.38%, respectively.

As a stockholder, you may pay certain fees and expense if you hold
shares of CLM, PGF or MGC, or in CLM-Post PGF Merger, in CLM-Post MGC Merger, or
in CLM-Post combined PGF and MGC Mergers. These fees and expenses, including the
fees and expenses based on a pro forma basis, post the mergers are set forth in
the table below and the example that follows.

EXPENSE TABLE

CLM Pro
CLM Forma, Post
CLM Pro Forma, PGF and MGC
Pro Forma, Post PGF Mergers
Post MGC Merger Combined
MGC CLM PGF Merger Only Only
--- --- --- ----------- ---------- -----------

SHAREHOLDER
TRANSACTION EXPENSES

ANNUAL EXPENSES(1)
Investment

Advisory Fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Other Expenses(2)
1.13% 0.48% 0.51% 0.27% 0.41% 0.25%
TOTAL ANNUAL EXPENSES

2.13% 1.48%(3) 1.51%(3) 1.27%(4) 1.41%(4) 1.25%(4)
===== ======== ======== ======== ======== ========

-----------------
(1) The percentages in the above table expressing annual fund operating
expenses are based on each Fund's operating expenses as of December 31,
2003.
(2) Other Expenses include administration, fund accounting, custody and
transfer agency fees as well as legal and auditing annual expenses.
These figures do not reflect the expenses of the MGC Merger, PGF
Merger, or of the combined mergers.
(3) Total Annual Expenses does not reflect the effect of the Current Fee
Waiver of 1.5% on an annualized basis. Assuming that the contractual
Post Fee Waiver continues, the Total Annual Expenses are expected to be
1.20%.
(4) Total Annual Expenses does not reflect the effect of any fee waiver.
Assuming that the contractual Post Merger Fee Waiver is in effect, the
Total Annual Expenses are expected to be 1.20%.

Example. The purpose of the following example is to help you understand the
costs and expenses you may bear, directly or indirectly, as an
investor. This example is based on the level of total annual operating
expenses for each Fund listed in the table above, the total expenses
relating to a $10,000 investment, assuming a 5% annual return and
reinvestment of all dividends and distributions. Stockholders do not
pay these expenses directly, they are paid by the Funds before they
distribute net investment income to stockholders. This example should
not be considered a representation of future expenses, and actual
expenses may be greater or less than those shown. Federal regulations
require the example to assume a 5% annual return, but actual annual
returns will vary.

-33-

Pro Forma, Pro Forma, Pro Forma, Post
Post MGC Post PGF PGF and MGC
MERGER MERGER MERGERS
YEARS MGC CLM PGF COMBINED
----- --- --- --- ------- --------- ---------------

1 $216 $151 $154 $129 $144 $127
3 $667 $468 $477 $403 $446 $397
5 $1,144 $808 $824 $697 $771 $686
10 $2,462 $1,768 $1,802 $1,534 $1,691 $1,511

FINANCIAL HIGHLIGHTS

The information required in this portion is being incorporated by
reference from each Fund's Annual Report to Stockholders dated December 31, 2003
which have been filed with the SEC. This information was audited by Tait, Weller
& Baker, each Fund's independent auditors, whose reports, along with each Fund's
financial statements, are incorporated herein by reference and included in each
Fund's Annual Report to Stockholders. Each of the Fund's Annual Reports and
Semi-Annual Reports may be obtained without charge, by writing to the Secretary
of the Fund c/o Bear Stearns Funds Management Inc., 383 Madison Avenue, 23 Fl.,
New York, New York 10179, or by calling 1-800-837-2755.

COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES

ORGANIZATION.

CLM and MGC are both closed-end, diversified management investment
companies registered under the Investment Company Act. Both Funds are organized
as corporations under the laws of the State of Maryland. CLM is managed and
advised by Cornerstone Advisors, and MGC is advised by DeAM. CLM's shares of
common stock are listed and trade on the AMEX under the symbol "CLM" and MGC's
shares of common stock are listed and trade on the NYSE under the symbol "MGC."
After the MGC Merger, CLM's shares will continue to trade on the AMEX under the
symbol "CLM", while MGC's shares will be delisted and MGC will cease to exist.

The shares of common stock of each Fund have equal non-cumulative
voting rights and equal rights with respect to dividends, assets and
dissolution. Each Fund's shares of common stock are fully paid and
non-assessable and have no preemptive, conversion or other subscription rights.
Fluctuations in the market price of each Fund's shares is the principal
investment risk of an investment in either Fund. Portfolio management, market
conditions, investment policies and other factors affect such fluctuations.
Although the investment objectives, policies and restrictions of each Funds are
similar, there are differences between them, as discussed below. There can be no
assurance that either Fund will achieve its stated investment objective.

INVESTMENT OBJECTIVES.

CLM

MGC

MGC's primary investment objective is to seek long-term capital
appreciation principally by investing in common stocks and securities
convertible into common, stock, substantially all of which will be U.S.
securities. The Fund will seek current income as a secondary objective. There is
no assurance that the primary or secondary objectives of the Fund can be
achieved.

-34-

Each Fund's foregoing investment objective cannot be changed without
the vote of a majority of the Fund's outstanding voting securities of the Fund
as set forth in Section 2(a)(42) the Investment Company Act. No assurance can be
given that either Fund's investment objective will be achieved.

COMPARISON OF INVESTMENT POLICIES.

CLM

Although CLM has the ability to invest a significant portion of its
assets in non-U.S. companies, the Fund has consistently maintained the
investment of at least 90% of its assets in U.S. companies since June 30, 2001.

CLM may also invest up to 10% of its assets in the aggregate in the
securities of other investment companies and up to 5% of its assets in any one
such investment company, provided that such investment does not represent more
than 3% of the voting stock of the acquired investment company of which such
shares are purchased. As a shareholder in any investment company, the Fund will
bear its ratable share of the investment company's expenses and would remain
subject to payment of the Fund's advisory and administrative fees with respect
to the assets so invested.

CLM's foregoing investment policies may be changed by the Fund's Board
of Directors without shareholder vote.

MGC

MGC seeks to achieve its primary objective by investing principally in
common stocks of companies with stock market capitalization primarily in the
range of $100 million to $2.2 billion at the time of investment (small cap
stocks). Stock market capitalizations are calculated by multiplying the total
number of common shares outstanding by the market price per share of the stock.
MGC may also invest in companies which offer the possibility of accelerating
earnings growth because of management changes, new products or structural
changes in the economy. MGC may also invest in companies with mid or large
capitalizations.

-35-

MGC seeks higher returns through investing in common stocks of
companies with small market capitalizations, which are not as well-known to the
general public, may have less investor following, and may provide opportunities
for investment gains due to the relative inefficiencies in this sector of the
marketplace. Further, the price earnings ratios of small capitalization
companies are at the lower end of historical levels when compared to the price
earnings ratios of companies with larger market capitalizations.

The Fund seeks to invest in those companies where DeAM believes
earnings will grow both faster than inflation and faster than the economy in
general and where it believes such growth has not yet been fully reflected in
the market price of these stocks. In seeking such investments DeAM gives weight
to companies possessing a variety of characteristics including quality of
management, a leading or dominant position in a major product line, a sound
financial position, and a relatively high rate of return on invested capital so
that future growth can be financed from internal sources.

MGC has the ability to hedge against a decline in value of securities
owned by it or an increase in the price of securities which it plans to purchase
through the writing and purchase of exchange traded options, and the purchase
and sale of futures contracts and related options.

MGC's foregoing investment policies may be changed by the Fund's Board
of Directors without shareholder vote.

POST MERGER INVESTMENT POLICY

It is important to note that if the MGC Merger is approved, MGC
stockholders will become stockholders in CLM and will be subject to CLM's
investment objective, investment policies and restrictions. Historically, MGC
has invested substantially all of its assets in small capitalization companies
and CLM has invested in large and mid capitalization companies. It is the
intention of CLM's management to, over time, continue to invest primarily in
large and mid capitalization companies. However, in the event that the MGC
Merger is approved, Cornerstone Advisors' current intention is to maintain at
least 40% of MGC's portfolio holdings until June 18, 2005.

EACH FUND'S NON-PRINCIPAL INVESTMENT POLICIES

Securities Lending. CLM may lend its portfolio securities to
broker-dealers in amounts equal to no more than 33 1/3% of the Fund's net
assets. MGC may lend its portfolio securities to broker-dealers or institutional
investors in amounts equal to no more than 30% of the Fund's net assets. These
transactions will be callable at any time and are fully collateralized at all
times with cash and/or high quality, short-term debt obligations. These
transactions involve risk to a Fund if the other party should default on its
obligation and the Fund is delayed or prevented from recovering the securities
lent. In the event the original borrower defaults on its obligation to return
lent securities, the Fund will seek to sell the collateral, which could involve
costs or delays. To the extent proceeds from the sale of collateral are less
than the repurchase price, the Fund would suffer a loss and you could lose money
on your investment.

Borrowing. Each Fund may borrow money, up to 15% of the value of the
respective Fund's total assets at the time of such borrowings, from banks for
temporary or emergency purposes or for the clearance of transactions in amounts
not exceeding 10% (taken at the lower of cost or current value) of its total
assets (not including the amount borrowed) and may also pledge its assets to
secure such borrowings. To reduce its indebtedness, a Fund may have to sell a
portion of its investments at a time when it may be disadvantageous to do so. In
addition, interest paid by the Fund on borrowed funds would decrease the net
earnings of the Fund

-36-

Under the Investment Company Act, neither Fund may:

(1) invest more than 5% of its total assets in the securities of
any one investment company; nor
(2) acquire more than 3% of the outstanding voting securities of
any such company.

UNITED STATES FEDERAL INCOME TAXES

-37-

Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the stockholder's U.S. tax attributable to his or her foreign
source taxable income. For this purpose, if the pass-through election is made,
the source of each Fund's income flows through to its stockholders. Any gains
from the sale of securities by either Fund will be treated as derived from U.S.
sources and certain currency fluctuation gains, including fluctuation gains from
foreign currency-denominated debt securities, receivables and payables, will be
treated as ordinary income derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit), including the foreign source
passive income passed through by each Fund. Because of the limitation,
stockholders taxable in the United States may be unable to claim a credit for
the full amount of their proportionate share of the foreign taxes paid by each
Fund. The foreign tax credit also cannot be used to offset more than 90% of the
alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals.

INFORMATION ABOUT THE MERGER

GENERAL.

Under the MGC Plan, MGC will merge with and into CLM on the Effective
Date. As a result of the MGC Merger and on the Effective Date:

(1) MGC will no longer exist; and
(2) CLM will be the surviving corporation and MGC will then:
(a) deregister as an investment company under the
Investment Company Act,
(b) withdraw from registration under the Exchange Act,
(c) remove its shares of common stock from listing on the
NYSE, and (d) cease its separate existence under
Maryland law.

Each share of common stock of MGC will convert into an equivalent
dollar amount of full and fractional shares of CLM common stock, based on the
relative net asset value per share of each Fund calculated at the close of
business on the Business Day preceding the Effective Date. CLM full and
fractional shares will be issued to all of the MGC stockholders. MGC
stockholders that participate in the MGC dividend reinvestment plan shall
receive fractional shares. Any MGC stockholder that does not participate in
MGC's dividend reinvestment plan will not receive fractional shares, rather
CLM's transfer agent will aggregate all fractional shares, sell the resulting
full shares on the AMEX at the then current market price and remit the proceeds
to MGC's stockholders in proportion to their fractional shares.

Under Section 3-202 of the MGCL, stockholders of a corporation whose
shares are traded publicly on a national securities exchange, such as each
Fund's shares, are not entitled to demand the fair value of their shares upon a
merger; therefore, the stockholders of either Fund will be bound by the terms of
the MGC Merger. However, any stockholder of either Fund may sell his or her
shares of common stock at any time prior to the MGC Merger on the national
securities exchange on which such Fund is listed and trades.

The MGC Plan may be terminated and the MGC Merger abandoned, whether
before or after approval by the Funds' stockholders, at any time prior to the
Effective Date either (i) by the mutual written consent of the Board of
Directors of each Fund, or (ii) by either Fund's Board of Directors if the
conditions to that Fund's obligations under the MGC Plan have not been satisfied
or waived.

-38-

If the MGC Merger has not been consummated by July 30, 2004, the MGC
Plan automatically terminates on that date, unless a later date is mutually
agreed upon by the Board of Directors of each Fund.

REASONS FOR THE MGC MERGER.

The Board of Directors of each Fund, including the Non-Interested
Directors, considered the proposed MGC Merger at separate meetings of each Board
held on January 30, 2004, February 19 and February 20, 2004, and unanimously
approved the proposed MGC Merger at separate meetings of each Board held on
February 19 and February 20, 2004. For the reasons discussed below, the Board of
Directors of each Fund, including the Non-interested Directors of each Fund,
after consideration of the potential benefits of the MGC Merger to the
stockholders of each Fund and the expenses expected to be incurred by each Fund
in connection therewith, unanimously determined that:

(1) the interests of the existing stockholders of each Fund will
not be diluted as a result of the proposed MGC Merger; and
(2) the proposed MGC Merger is in the best interests of each Fund
and its stockholders.

The reasons stated above were fully recorded in each Fund's minute
books.

Three principal factors led the Boards to reach these conclusions: (i)
the MGC Merger will create a larger Fund and, consequently, all other factors
being equal, should result in an expense ratio that is lower than the current
expense ratio of either Fund absent any voluntary fee waiver; (ii) the larger
Fund should provide better market liquidity for stockholders who want to sell
their shares or add to their holdings; and (iii) Cornerstone Advisor's
experience managing a fixed, monthly distribution policy. The Boards believe
that, all other things being equal, a lower expense ratio and better market
liquidity for the shares would be a beneficial result to the surviving Fund.

IN THE JUDGMENT OF THE BOARD OF DIRECTORS OF EACH FUND, THE MGC MERGER SERVES
THE BEST INTERESTS OF EACH FUND AND ITS STOCKHOLDERS.

Stockholders should note that the Boards of Directors of the two Funds
are very similar. Mr. Clark, an affiliate of Cornerstone Advisors, is currently
the Chairman of the Board and the President of MGC, and is an officer and
director of CLM and PGF. Scott Rogers is a Non-interested Director of CLM, but
does not serve on the Board of MGC. Therefore, although all of the
Non-interested Directors are "non-interested" with respect to each of the Funds
under the Investment Company Act, a majority of the Non-interested Directors are
not at arms-length with respect to the proposed MGC Merger.

During each of the MGC and CLM Board Meetings, Messrs. Bradshaw and
Clark participated in the discussions concerning the MGC Merger and informed the
members of the Board of their personal interest in Cornerstone Advisor, which
currently is the investment adviser of CLM and would continue to serve as the
investment adviser to CLM as the surviving fund in the event that the MGC Merger
is approved by the stockholders. Following the discussions, the MGC and CLM
Boards asked that Messrs. Bradshaw and Clark leave the room to allow the
remaining Non-interested Directors the opportunity to meet in executive session
to discuss the MGC Merger proposal. Following the executive session, a vote was
taken at which all of the Directors of the Fund, including Messrs. Bradshaw and
Clark, voted in favor of the MGC Merger proposal.

The Board of Directors of each Fund, in declaring advisable and
recommending the proposed MGC Merger, also considered the following:

(1) the capabilities and resources of Cornerstone Advisors in the
area of investment management;

-39-

(2) the experience of Cornerstone Advisors in managing an
investment company that has implemented a fixed, monthly
distribution policy;
(3) the requirement to replace DeAM at the end of its current term
as MGC's investment adviser;
(4) expense ratios and information regarding fees and expenses of
the Funds, both currently and on a pro forma basis after the
MGC Merger;
(5) the terms and conditions of the MGC Merger and whether it
would result in dilution of the interests of each Fund and its
existing stockholders;
(6) the compatibility of each Fund's portfolio securities,
investment objective, policies and restrictions;
(7) the tax consequences to each Fund and its stockholders in
connection with the MGC Merger; and
8) the anticipated expenses of the MGC Merger.

In reviewing issues relating to the structure of the MGC Merger and the
selection of the surviving corporation in the MGC Merger, each Board also
considered information provided to them by Cornerstone Advisors concerning:

(1) the performance records of each Fund;
(2) public and market perception of each Fund;
(3) the relative size of each Fund;
(4) the investment policies, strategies and personnel Cornerstone
Advisors intends to utilize in managing the surviving Fund;
(5) Cornerstone Advisors' recommendation that CLM be the surviving
corporation; and
(6) the relative tax positions of each Fund.

TERMS OF THE MGC MERGER AGREEMENT.

The following is a summary of the significant terms of the MGC Plan.
This summary is qualified in its entirety by reference to the MGC Plan, attached
hereto as Exhibit B.

Each share of common stock of MGC will convert into an equivalent
dollar amount of full and fractional shares of CLM, based on the relative net
asset value per share of each Fund calculated at the close of business on the
Business Day (as defined in the MGC Plan) preceding the Effective Date. CLM full
and fractional shares will be issued to all of the MGC stockholders. MGC
stockholders that participate in the MGC dividend reinvestment plan will receive
fractional shares. Any MGC stockholder that does not participate in MGC's
dividend reinvestment plan will not receive fractional shares, rather CLM's
transfer agent will aggregate all fractional shares, sell the resulting full
shares on the AMEX at the then current market price and remit the proceeds to
MGC's stockholders in proportion to their fractional shares.

For purposes of valuing assets in connection with the MGC Merger, the
assets of MGC will be valued pursuant to the principles and procedures
consistently utilized by CLM, which principles and procedures are also utilized
by MGC in valuing its own assets and determining its own liabilities. As a
result, it is not expected that CLM's valuation procedures as applied to MGC's
portfolio securities will result in any difference from the valuation that would
have resulted from the application of MGC's valuation procedures to such
securities. The net asset value per share of CLM common stock will be determined
in accordance with these principles and procedures, and CLM will certify the
computations involved. The net asset value per share of each Fund will not be
adjusted to take into account differences in unrealized gains and losses, nor
will it be adjusted to take into account the potential value of tax loss
carryforwards.

CLM will issue separate certificates or share deposit receipts for CLM
common stock to stockholders of MGC. CLM will deliver these certificates or
share deposit receipts representing shares of CLM common stock to American Stock
Transfer & Trust Co., as the transfer agent and registrar for CLM common stock.
CLM will not permit any MGC stockholder to receive new certificates representing

-40-

shares of CLM common stock until the stockholder has surrendered his or her
outstanding certificates representing shares of the common stock of MGC or, in
the event of lost certificates, posted adequate bond. MGC will request its
stockholders to surrender their outstanding certificates representing shares of
the common stock of MGC or post adequate bond therefor. Distributions payable to
holders of record of shares of CLM as of any date after the Effective Date and
prior to the exchange of certificates by any stockholder of MGC will be paid to
such stockholder, without interest; however, such distributions will not be paid
unless and until such stockholder surrenders his or her stock certificates of
MGC for exchange.

PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. UPON
CONSUMMATION OF THE MGC MERGER, STOCKHOLDERS OF MGC WILL BE FURNISHED WITH
INSTRUCTIONS FOR EXCHANGING THEIR STOCK CERTIFICATES FOR CLM STOCK CERTIFICATES.

The net asset value of the CLM shares received by MGC stockholders will
be equal to the aggregate net asset value of the MGC shares exchanged.

The MGC Plan provides, among other things, that the MGC Merger will not
take place without (i) the requisite approval of the stockholders of CLM and
MGC, and (ii) the effectiveness of a Registration Statement on Form N-14.

The MGC Plan may be terminated at any time prior to the Effective Date
by mutual agreement of each Fund's Board of Directors or by either Fund if the
other has violated a condition of the MGC Plan. The MGC Plan will automatically
terminate after July 30, 2004 if the MGC Merger has not been consummated, unless
such time is extended by mutual agreement of the Board of Directors of each
Fund.

The MGC Plan may be amended, modified or supplemented by mutual
agreement of the Boards of Directors of CLM and MGC. However, no amendments
which would have the effect of changing the provisions for determining the
number of shares issued to MGC stockholders will be permitted following the
meeting unless MGC stockholders consent to the amendment.

EXPENSES OF THE MGC MERGER.

In evaluating the proposed MGC Merger, the Board of Directors of each
Fund has estimated the amount of expenses each Fund will incur, including, but
not limited to, AMEX listing fees, SEC registration fees, legal and accounting
fees, proxy and distribution costs, and expenses incurred in connection with the
MGC Merger. The estimated total expenses pertaining to the MGC Merger that CLM
will bear is approximately $86,000 (which includes the expenses for the MGC
Merger and PGF Merger) and the amount that MGC will bear is approximately
$180,000. Some of these expenses would have been incurred by each Fund in
connection with their annual meeting of stockholders. Each Fund will bear its
respective costs of the MGC Merger, however, to the extent that any of the
expenses incurred relate specifically to actions taken as a result of the MGC
Merger, such as SEC registration fees and AMEX listing fees, such expenses will
be allocated on the basis of relative net assets of all of the Funds.

The expenses of the MGC Merger, without giving effect to the Current
Fee Waiver with respect to CLM only, are expected to result in a reduction in
net asset value per CLM share and MGC shares of approximately $0.02, and $0.02,
respectively.

TAX CONSIDERATIONS AND CONSEQUENCES OF THE MGC MERGER.

THE FOLLOWING IS A DISCUSSION OF CERTAIN U.S. FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO MGC STOCKHOLDERS WHO EXCHANGE THEIR SHARES OF
MGC STOCK FOR SHARES OF CLM COMMON STOCK IN THE MERGER. THIS DISCUSSION
ADDRESSES ONLY MGC STOCKHOLDERS WHO ARE U.S. HOLDERS (AS DEFINED BELOW) AND HOLD
MGC STOCK AS A CAPITAL ASSET. IT DOES NOT ADDRESS ALL OF THE U.S. FEDERAL INCOME
TAX CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR MGC STOCKHOLDER IN LIGHT
OF THAT STOCKHOLDER'S INDIVIDUAL CIRCUMSTANCES OR TO A MGC STOCKHOLDER WHO IS
SUBJECT TO SPECIAL RULES, INCLUDING, WITHOUT LIMITATION:

-41-

o a financial institution or insurance company;
o a stockholder who is not a U.S. Holder;
o a pass-through entity or an investor in such an entity;
o a dealer or broker in securities or foreign currencies; and
o a stockholder who holds MGC stock as part of a hedge,
appreciated financial position, straddle, constructive sale or
conversion transaction.

MGC STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.

"U.S. Holder" refers to a beneficial holder of stock that is
(i) an individual citizen or resident of the United States, (ii) a corporation,
or other entity taxable as a corporation for U.S. federal income tax purposes,
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source or (iv) a trust
(x) that is subject to the supervision of a court within the United States and
the control of one or more U.S. persons as described in section 7701(a)(30) of
the Code or (y) that has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a U.S. person.

If a partnership holds MGC stock, the tax treatment of a
partner will generally depend upon the status of the partner and the activities
of that partnership. If a U.S. Holder is a partner of a partnership holding that
MGC stock, the holder is urged to consult its tax advisor regarding the tax
consequences of the merger.

It is a condition to the completion of the merger that MGC and
CLM receive a written opinion from Blank Rome LLP dated as of the effective date
of the merger, to the effect that the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code. The opinion will rely on
certain assumptions as well as representations and covenants made by each of MGC
and CLM. If any of those assumptions, representations or covenants are
inaccurate, Blank Rome may not be able to render the required opinion and the
tax consequences of the merger could differ from those discussed here. An
opinion of counsel is not binding on the IRS or any court, nor does it preclude
the IRS from adopting a contrary position. No ruling has been or will be sought
from the IRS on the U.S. federal income tax consequences of the merger.

Assuming that the merger qualifies as a reorganization within
the meaning of Section 368(a) of the Code, for U.S. federal income tax purposes:

o A MGC stockholder whose shares of MGC stock are exchanged in
the merger for shares of CLM common stock will not recognize
gain or loss, except to the extent of cash, if any, received
in lieu of a fractional share of CLM common stock;

o A MGC stockholder's aggregate tax basis in shares of CLM
common stock received in the merger (including any fractional
share interests deemed to be received and converted to cash)
will equal the aggregate tax basis of the MGC stock
surrendered in the merger; and

o A MGC stockholder's holding period for shares of CLM common
stock received in the merger will include the holding period
for the shares of MGC stock surrendered in the merger.

-42-

CASH IN LIEU OF FRACTIONAL SHARES

To the extent that a MGC stockholder receives cash in lieu of
a fractional share of CLM common stock, the stockholder will be deemed to have
received that fractional share in the merger and then to have received the cash
in exchanged for that fractional share. The stockholder will generally recognize
capital gain or loss equal to the difference between the cash received and the
portion of the stockholder's tax basis in the shares of MGC stock surrendered
allocable to that fractional share. This capital gain or loss will generally be
long-term capital gain or loss if the MGC stockholder's holding period for its
shares of MGC stock exceeded one year at the effective time of the merger.

While MGC is not aware of any adverse state or local tax consequences
of the proposed MGC Merger, it has not requested any ruling or opinion with
respect to such consequences and stockholders may wish to consult their own tax
advisers with respect to such matters.

ADDITIONAL INFORMATION ABOUT THE FUNDS

DESCRIPTION OF SECURITIES TO BE ISSUED.

The following table shows information about the common stock of each
Fund as of December 31, 2003.

CLM AMOUNT AUTHORIZED AMOUNT HELD BY FUND AMOUNT OUTSTANDING
----
Common Stock 25,000,000 0 3,849,524
MGC
---
Common Stock 150,000,000 0 9,860,115

As of December 31, 2003, the net asset value of CLM common stock was
$6.90, and the market price per share was $9.00. As of that same date, the net
asset value of MGC common stock was $10.98, and the market price per share was
$12.37.

PREMIUM/DISCOUNT TO NET ASSET VALUE.

Shares of closed-end investment companies frequently trade at a
discount from net asset value. This characteristic is a risk separate and
distinct from the risk that the fund's net asset values may decrease, and this
risk may be greater for stockholders expecting to sell their shares in a
relatively short period. THE SHARES OF COMMON STOCK OF THE FUNDS SHOULD THUS BE
VIEWED AS BEING DESIGNED PRIMARILY FOR LONG-TERM INVESTORS AND SHOULD NOT BE
CONSIDERED A VEHICLE FOR TRADING PURPOSES.

During the period since the inception of each Fund, the common stock of
both Funds have generally traded at a discount to net asset value, however, as
of June 30, 2003, CLM has consistently traded at a premium and as of September
30, 2003, MGC has consistently traded at a premium. As of the last business day
prior to the announcement of the proposed MGC Merger, each Fund's shares were
trading at a premium. It is not possible to state whether shares of CLM will
trade at a premium or discount to net asset value following the MGC Merger, or
the extent of any such premium or discount.

-43-

PER SHARE DATA FOR INVESTORS FIRST FUND, INC.
COMMON STOCK TRADED ON THE NYSE

Closing Market Closing Net

Quarter Ended High Price Low Price Price Asset Value Premium/(Discount)

3/31/02 11.70 10.66 11.50 11.95 (3.77)
6/30/02 11.42 9.85 9.99 11.08 (9.84)
9/30/02 10.00 7.53 7.78 8.85 (12.09)
12/31/02 9.01 7.08 8.33 9.47 (12.04)
3/31/03 8.70 7.35 7.66 8.41 (8.92)
6/30/03 9.55 7.65 9.36 9.87 (5.17)
9/30/03 11.05 9.33 10.45 10.29 1.55
12/31/03 12.45 10.50 12.37 10.91 13.38

PER SHARE DATA FOR CORNERSTONE STRATEGIC VALUE FUND, INC.
COMMON STOCK TRADED ON THE AMEX *

Closing Market Closing Net
Quarter Ended High Price Low Price Price Asset Value Premium/Discount
3/31/02 8.05 7.58 7.65 9.04 (15.38)
6/30/02 7.80 6.57 6.65 7.73 (13.97)
9/30/02 6.53 5.29 5.40 6.22 (13.18)
12/31/02 5.99 5.00 5.88 6.38 (7.84)
3/31/03 6.28 5.40 5.58 6.01 (7.15)
6/30/03 7.35 5.65 7.35 6.54 12.39
9/30/03 7.67 7.15 7.43 6.44 15.37
12/31/03 9.00 7.61 9.00 6.80 32.35
------------------

* The figures provided from March 31, 2002 through December 31, 2002, are based
on the per share data for the Fund's securities as traded on the NYSE.

Capitalization.

The following table shows on an unaudited basis the capitalization of
each of CLM, MGC and PGF as of December 31, 2003, without regard to the
voluntary fee waiver in effect during that same period, and on a pro forma basis
as of that same date giving effect to the PGF Merger, the MGC Merger and of the
combined PGF and MGC Mergers:

(in thousands, except per share values)

Pro Forma, Post
Combined PGF
Pro Forma, Post Pro Forma, Post and MGC Mergers
MGC CLM PGF MGC Merger* PGF Merger* *
-------------------------------------------------------------------------------------------------------------

Net Assets 108,277 26,565 26,056 134,576 52,466 160,562

Shares of Common
Stock Outstanding
9,860 3,850 1,167 19,561 7,627 23,338

Net Assets Per
Share of Common
Stock 10.98 6.90 22.32 6.88 6.88 6.88
-----------------
* The Pro Forma Net Assets of CLM post merger account for the aggregate cost of
the mergers to participating Funds.

Dividends and Other Distributions.

Each Fund intends to distribute dividends from its net investment
income and any net realized capital gains after utilization of capital loss
carryforwards annually to prevent application of a federal excise tax. An
additional distribution may be made if necessary. Any dividends or capital gains
distributions declared in October, November or December with a record date in
such a month and paid during the following January will be treated by
stockholders for federal income tax purposes as if received on December 31 of
the calendar year in which it is declared. Dividends and distributions of each
Fund are invested in shares of the Fund in accordance with each Fund's dividend
reinvestment plan and credited to the stockholder's account on the settlement
date which is usually three business days from the purchase date or, at the
stockholder's election, paid in cash.

For a complete discussion of CLM's distribution policy, please see page
21, above.

On July 26, 2003, MGC's Board of Directors adopted a fixed, monthly
distribution policy, pursuant to which the Fund makes fixed, monthly
distributions. In determining to adopt the distribution policy, the Board sought
to make regular monthly distributions at an annualized rate equal to
approximately fifteen percent (15%) of the Fund's net asset value. The amount of
the distributions was set at $0.125 per share for the remaining months of 2003,
subject to the Board's ability to increase the amount of the distribution. On
September 24, 2003, the Board determined to increase the amount of the monthly
distribution to an amount equal to $0.14 per share for the remaining calendar
months of 2003 and for the calendar year of 2004. The Board of Directors of each
Fund has reserved the right to change the dollar amount of the monthly
distribution, but has indicated the intention to maintain the total annual
amount of distributions at or above the current level. Such distributions may be
treated as returns of capital, capital gain or ordinary income depending on each
Fund's tax position for the year as a whole. Stockholders will be advised of the
relevant treatment when the tax positions are known.

It is the intention of the current Board of Directors to continue its
current monthly distribution policy after the MGC Merger but there can be no
guarantee that the policy will be continued for any specific time period. In
addition, the Fund filed with the SEC an application for exemptive relief
seeking relief from the restrictions of Rule 19b-1 promulgated under the
Investment Company Act which limits the amount of capital gains distributions
that a RIC may make during a calendar year. There can be no assurances that such
application will be granted by the SEC.

Portfolio Valuation.

Investments of each Fund are stated at value in each Fund's financial
statements. All securities for which market quotations are readily available are
valued at the last sales price or lacking any sales, at the closing price last
quoted for the securities (but if bid and asked quotations are available, at the
mean between the current bid and asked prices). Securities that are traded
over-the-counter are valued at the mean between the current bid and the asked
prices, if available. All other securities and assets are valued at fair value
as determined in good faith by each Fund's Board of Directors. Short-term
investments having a maturity of 60 days or less are valued on the basis of
amortized cost. The Board of Directors of each Fund has established general
guidelines for calculating fair value of securities that are not readily
marketable. At December 31, 2003, both MGC and CLM held no securities valued in
good faith by the Board of Directors. The net asset value per share of each Fund
is made available to the public on a weekly basis.

Dividend Reinvestment and Cash Purchase Plan.

CLM

For a full description of CLM's Dividend Reinvestment and Cash Purchase
Plan, please see page 22, above.

MGC

Under the Fund's Dividend Reinvestment Plan (the "Plan"), all
distributions from net investment income and/or capital gains will be reinvested
in additional shares of the Fund. PFPC, Inc. ("PFPC") administers the Plan. You
are deemed to participate in the Plan unless you elect to be paid in cash. If
you want to be paid in cash, you should notify PFPC. If your shares are held in
the name of a broker or nominee or you are transferring your account to a new
broker, you should tell your broker or nominee whether you wish to participate
in the Plan or to receive their distributions in cash.

You may withdraw from the Plan at any time by notifying PFPC in
writing. If PFPC receives your notice within seven days of the record date of a
distribution, your withdrawal from the Plan will be effective after that
distribution is paid. When you withdraw from the Plan, you will receive a stock
certificate for your full shares and a check for any fractional shares. The
value of the fractional shares will be determined by using the Fund's current
market value (net of any expenses incurred in converting the fractional shares
to cash).

The method for determining the number of shares you receive when your
distributions are reinvested will vary depending upon whether the net asset
value of the Fund's shares is higher or lower than its market price, the number
of shares you receive will be determined by dividing the amount of your
distribution either by the Fund's net asset value per share or by 95% of its
market price, whichever is higher. If the net asset value of the Fund's shares
is higher than its market price, the number of shares you receive will be
determined by dividing the amount of your distribution by the Fund's average
closing price over the five trading days preceding the payment date.

Whenever the Fund declares a dividend or capital gains distribution
payable only in cash and the net asset value per share of the Fund's common
stock exceeds the market value per share on the payable date, PFPC will apply
the amount of such dividend or distribution payable to Plan participants of the
Fund in Fund shares (less such Plan participant's pro rata share of brokerage
commissions incurred with respect to open-market purchase in connection with the

reinvestment of such dividend or distribution) to the purchase on the open
market of Fund shares for such Plan participant's account. Such purchases will
be made on or after the payable date for such dividend or distribution, an in no
event more than 30 days after such date except where temporary curtailment or
suspension of purchase is necessary to comply with applicable provisions of
federal securities laws. PFPC may aggregate a Plan participant's purchases with
the purchases of other Plan participants, and the average price (including
brokerage commissions) of all shares purchased by PFPC shall be the price per
share allocable to each Plan participant.

There will be no brokerage charges for shares directly issued by the
Fund. There is no direct service charge to participants in the Plan. PFPC's fee
will be borne by the Fund. The Board reserves the right to amend the Plan either
to provide for a charge to participants or for any other reasons.

Corporate Governance Provisions.

Each Fund is a Maryland corporation and in many respects have similar
charter and by-law provisions.

Each Fund's By-laws provide, among other things, that:

(1) certain advance notice requirements must be met in order for Stockholders
to submit proposals at annual meetings and for nominations by stockholders
for election to the Board of Directors; and

(2) the power to amend the By-laws is reserved to the Board of Directors,
except as otherwise required by the Investment Company Act.

MGC's By-laws require the approval of 75% of the Directors to approve
any "Contract" (as defined in the By-laws), which would include an investment
advisory agreement, between the Fund and anyone affiliated with the Fund,
including an officer or a director of the Fund. In the event the Board approves
a Contract, then another section of the By-laws makes it mandatory for the Fund
to conduct a tender offer for at least 50% of the Fund's outstanding securities.
These provisions can only be amended or repealed by 60% of the total outstanding
shares of common stock. The Board of Directors of MGC, based on the advice of
Fund Counsel, has determined that the MGC Merger proposal, if approved, will not
be in contravention of these By-law provisions. Moreover, the MGC Board of
Directors unanimously approved the MGC Merger and determined that conducting a
tender offer during a time when the Fund is now consistently selling at a
premium would not be in the best interests of the Fund or its stockholders.

In addition, MGC's By-laws have divided the members of the Board of
Directors into classes in which each class expires three years from the date of
the director's last election.

MANAGEMENT OF THE FUNDS

Directors and Principal Officers.

Please see Item III - Proposal 4 for a description of the Board of
Directors and the executive officers of CLM.

Please see Item V - Proposal 2 for a description of the Board of
Directors and the executive officers of MGC.

Investment Adviser.

CLM

For a complete description of CLM's investment adviser, please see page
24, above.

MGC

Under the investment advisory agreement with DeAM, DeAM directs the
investments of MGC in accordance with its investment objectives, policies and
restrictions. DeAM determines the securities, instruments and other contracts
relating to investments to be purchased, sold or entered into by MGC. The
advisory fee payable under the investment advisory agreement is equal to an
annual rate of 1.00% of MGC's average daily net assets, computed and accrued
daily and payable monthly.

MGC is managed by a team consisting of Ms. Audrey M. T. Jones, CFA and
Managing Director of Deutsche Asset Management; Bob Grandhi, CFA and Director of
Deutsche Asset Management; and Doris R. Klug, CFA and Director of Deutsche Asset
Management

Administrator.

BSFM serves as each Fund's administrator pursuant to an administrative
agreement with each Fund. BSFM is located at 383 Madison Avenue, 23rd Floor, New
York, New York 10179.

BSFM provides office facilities and personnel adequate to perform the
following services for each Fund:

(1) oversight of the determination and dissemination of each Fund's net
asset value in accordance with the respective Fund's policy as
adopted from time to time by the respective Board of Directors;
(2) maintenance of the books and records of each Fund as required under
the Investment Company Act;
(3) preparation of each Fund's U.S. federal, state and local income tax
returns;
(4) preparation of financial information for each Fund's proxy
statements and semiannual and annual reports to stockholders; and
(5) preparation of certain of each Fund's reports to the SEC.

As of December 31, 2003, BSFM provided accounting and/or administrative
services for 26 investment companies and investment partnerships, with combined
total assets of approximately $5.7 billion.

Custodian.

Custodial Trust Company, 101 Carnegie Center, Princeton, New Jersey, is
the custodian for both Funds' assets.

Transfer Agent and Registrar.

CLM

American Stock Transfer & Trust Co., 59 Maiden Lane, New York, New York
10038 acts as the transfer agent and registrar of CLM.

MGC

PFPC, Inc., P.O. Box 43027, Providence, RI 02940 acts as the transfer
agent and registrar of MGC.

Estimated Expenses.

Except as otherwise provided in the administrative services agreements,
each Fund's investment adviser and administrator are each obligated to pay
expenses associated with providing the services contemplated by the agreements
to which they are parties, including compensation of and office space for their
respective officers and employees connected with investment and economic
research, trading and investment management and administration of each Fund, as
well as the fees of all directors of each Fund who are affiliated with those
companies or any of their affiliates. Each Fund pays all other expenses incurred
in the operation of that Fund including, among other things:

(1) expenses for legal and independent accountants' services; (2) costs
of printing proxies, stock certificates and stockholder reports;
(3) charges of the custodians, and the transfer and dividend-paying
agent's expenses in connection with each Fund's Dividend
Reinvestment and Cash Purchase Plan;
(4) fees and expenses of unaffiliated directors; (5) accounting and
pricing costs;
(6) membership fees in trade associations;
(7) fidelity bond coverage for each Fund's officers and employees;
(8) directors' and officers' errors and omissions insurance coverage;
(9) brokerage costs and stock exchange listing fees and expenses;
(10) taxes; and
(11) other extraordinary or non-recurring expenses and other expenses
properly payable by each Fund's.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

MGC
Stock Shares of Common
Name and Address of Beneficial Owner Amount Beneficially Owned %
---------------------------------------------------------------------------

Deep Discount Advisors, Inc. (1)
One West Pack Square
Suite 777
Asheville, NC 28801 1,922,420 19.6%

Ron Olin Investment
Management Company (1)
One West Pack Square
Suite 777
Asheville, NC 28801 1,735,479 17.7%
---------------
(1) The information for MGC is based solely upon information presented
in a Schedule 13G/A, dated January 9, 2004, filed jointly by Deep
Discount Advisors, Inc. and Ron Olin Investment Management
Company.

All the directors and executive officers, as a group, of CLM, as of
December 31, 2003, owned less than 1% of the outstanding shares of CLM, and all
the directors and executive officers, as a group, of MGC, as of the same date,
owned less than 1% of the outstanding shares of MGC.

EXPERTS

REQUIRED VOTE

The MGC Merger has been approved by the Board of Directors of each
Fund. Approval of the MGC Merger requires the affirmative vote of the holders of
a majority of the outstanding shares of common stock of each Fund. Therefore an
abstention is equivalent to a vote against the MGC Merger. The Board of
Directors of each Fund recommends that the Stockholders vote in favor of this
Proposal 2.

LEGAL PROCEEDINGS

There are currently no material legal proceedings to which either Fund
is a party.

LEGAL OPINIONS

Certain legal matters in connection with the MGC Merger will be passed
upon for the Funds by Blank Rome LLP.

ITEM III. ADDITIONAL PROPOSALS TO BE VOTED ON BY CLM STOCKHOLDERS.

CLM PROPOSAL 3

AMENDMENT TO THE ARTICLES OF INCORPORATION

In connection with the proposed PGF and MGC Mergers, the Board of
Directors of CLM authorized an amendment to CLM's Articles of Incorporation
increasing the amount of authorized shares of common stock from twenty-five
million (25,000,000) to one hundred million (100,000,000) and changing the par
value per share from $0.01 per share to $0.001 per share. Such amendment will
only take effect in the event that both the PGF Merger and the MGC Merger are
approved by stockholders. Under the MGCL, an amendment to the Fund's Articles of
Incorporation must be approved by the Board of Directors and ratified by a
majority of the outstanding shares entitled to vote.

At the Board of Directors Meeting held on February 20, 2004, the Board
of Directors unanimously authorized the amendment to the Articles of
Incorporation to increase the authorized shares of common stock. Please see
Exhibit D for a copy of the Amendment to the Articles of Incorporation.

Required Vote

Ratification of the amendment to the Articles of Incorporation requires
the affirmative vote of the holders of a majority of CLM's outstanding voting
securities. If the amendment is approved by the Fund's shareholders, such change
will become effective immediately following the filing of the Fund's Certificate
of Amendment to the Articles of Incorporation with the Maryland Secretary of
State.

THE BOARD OF DIRECTORS, INCLUDING THE NON-INTERESTED DIRECTORS, RECOMMENDS THAT
THE SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE AMENDMENT TO CLM'S ARTICLES
OF INCORPORATION INCREASING THE AMOUNT OF AUTHORIZED SHARES OF COMMON STOCK.

CLM PROPOSAL 4

ELECTION OF DIRECTORS

In accordance with the Fund's By-laws, the Fund's Board of Directors is
divided into three classes: Class I, Class II and Class III. Each class has a
term of three years and 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 a meeting held on February 20, 2004, Mr. Bentz, a
Class II Director, tendered his resignation and the Board elected Mr. William A.
Clark, based on the recommendation of the Nominating Committee, to fill the
vacancy created by Mr. Bentz's resignation.

At the Meeting, stockholders will be asked to elect two Class III
Directors to hold office until the year 2007 Annual Meeting of Stockholders or
thereafter until each of their respective successors is duly elected and
qualified. The term of office of the Class III Directors, currently consisting
of Messrs. Glenn W. Wilcox, Sr. and Andrew Strauss, expires at the year 2007
Annual Meeting of Stockholders. In addition, stockholders are being asked to
elect one Class II Director, Mr. William A. Clark, to hold office until the year
2006 Annual Meeting or thereafter until his respective successor is duly elected
and qualified. If elected, each nominee has consented to serve as a director of
the Fund until his successor is duly elected and qualified.

Each Nominee was considered and recommended by CLM's Nominating
Committee at a meeting held on February 20, 2004.

The persons named in the accompanying form of proxy intend to vote at
the Meeting (unless directed not to vote) FOR the election of all of the
nominees. 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.

The following table sets forth the names, addresses, ages and principal
occupations of each of the nominees for election as Directors:

NOMINEES

Directorships held by
Term of Nominee for Director
Position Office Principal Occupation Outside of Fund
Name, Address(1) & Age with Fund Since during past 5 years Complex*
-----------------------------------------------------------------------------------------------------------

Class III Non-Interested Nominees to serve until the Year 2007 Annual Meeting of Stockholders:

Andrew A. Strauss (50) Director 2000 Attorney and senior Director and Chairman
member of Strauss & of the Nominating and
Associates, P.A., Corporate Governance
Attorneys, Asheville and Committees of Investors
Hendersonville, NC; First Fund, Inc.;
previous President of Director of Memorial
White Knight Healthcare, Mission Hospital
Inc. and LMV Leasing, Foundation, Deerfield
Inc., a wholly owned Episcopal Retirement
subsidiary of Xerox Community and Asheville
Credit Corporation; Symphony.
Director of Progressive
Return Fund, Inc. and
Cornerstone Total Return
Fund, Inc.

Class II Interested Nominee to serve until the Year 2006 Annual Meeting of Stockholders

(1) The mailing address of each Nominee with respect to Fund Operations is
383 Madison Avenue, 23rd Floor, New York, NY 10179.
* As of December 31, 2003, the Fund Complex is comprised of CLM, PGF and
Cornerstone Total Return Fund, Inc. all of which are managed by
Cornerstone Advisors, Inc. All of the Nominees were members of the
Board of Cornerstone Total Return Fund, Inc. and Progressive Return
Fund, Inc.

** Mr. Clark is an "interested person" as defined in the Investment
Company Act of 1940 ("Investment Company Act") because of his
affiliation with Cornerstone Advisors.

Remaining Board of Directors

The following tables set forth the names, addresses, ages and principal
occupations of each of the remaining Directors of the Fund.

Class I Non-Interested Directors to serve until the Year 2005 Annual Meeting of Stockholders

Edwin Meese III (72) Director 2001 Distinguished Fellow, Director, Investors
The Heritage Foundation, First Fund, Inc. and
Washington D.C.; Carrington Laboratories
Distinguished Visiting Incorporated
Fellow at the Hoover
Institution, Stanford
University;
Distinguished Senior
Fellow at the Institute
of United States
Studies, University of
London; Senior Adviser,
Revelation LP, Formerly
U.S. Attorney General
under President Ronald
Reagan; Director of
Cornerstone Total Return
Fund, Inc. and
Progressive Return Fund,
Inc.

Class II Non-Interested Directors to serve until the Year 2006 Annual Meeting of Stockholders

Scott B. Rogers (48) Director 2000 Chief Executive Officer, Chairman and Director,
Asheville Buncombe Recycling Unlimited;
Community Christian Director of A-B Vision
Ministry; and President, Board and
ABCCM Doctor's Medical Interdenominational
Clinic; Director, Faith Ministerial Alliance
Partnerships Inc.;
Appointee, NC Governor's
Commission on Welfare to
Work.; Director of
Progressive Return Fund,
Inc. and Cornerstone
Total Return Fund, Inc.

Thomas H. Lenagh (81) Director 1987 Chairman of the Board of Director of Investors
Photonics Products First Fund, Inc., The
Group; Independent Adams Express Company
Financial Adviser; and Petroleum and
Director of Progressive Resources Corporation
Return Fund, Inc. and
Cornerstone Total Return
Fund, Inc.

Class I Interested Director to serve until the Year 2005 Annual Meeting of Stockholders

Ralph W. Bradshaw (53)** Chairman 1998 President, Cornerstone Director, Investors
of the Advisors; Financial First Fund, Inc.;
Board and Consultant; President Previous Director of
President and Director of The Austria Fund
Cornerstone Total Return
Fund, Inc. and
Progressive Return Fund,
Inc.; Vice President,
Deep Discount Advisors,
Inc. (1993-1999).
------------
(1) The mailing address of each Nominee with respect to Fund Operations is
383 Madison Avenue, 23rd Floor, New York, NY 10179.
* As of December 31, 2003, the Fund Complex is comprised of CLM, PGF and
Cornerstone Total Return Fund, Inc. all of which are managed by
Cornerstone Advisors, Inc. All of the Nominees were members of the
Board of Cornerstone Total Return Fund, Inc. and Progressive Return
Fund, Inc.
** Mr. Bradshaw is an "interested person" as defined in the Investment
Company Act of 1940 ("Investment Company Act") because of his
affiliation with Cornerstone Advisors.

The following table sets forth, for each Director, the aggregate dollar
range of equity securities owned of the Fund and of all Funds overseen by each
Director in the Fund Complex as of December 31, 2003. The information as to
beneficial ownership is based on statements furnished to the Fund by each
Director.

Aggregate Dollar Range of Equity
Securities in All Funds Overseen
Dollar Range of Equity by Directors in Fund Complex.
Name Securities in the Fund.
------------------------ ------------------------------ -- ----------------------------------
Non-Interested Directors
Edwin Meese III 0 0
Andrew A. Strauss $1-$10,000 $10,001-$50,000
Thomas H. Lenagh 0 0
Glenn W. Wilcox Sr. $1-$10,000 $10,001-$50,000
Scott B. Rogers 0 0
Interested Directors
Ralph W. Bradshaw $10,001-$50,000 Over $100,000
William A. Clark $10,001-$50,000 Over $100,000
Gary Bentz* $50,000-$100,000 Over $100,000

* Mr. Bentz resigned on February 20, 2004.

Executive Officers
In addition to Messrs. Bradshaw and Clark, the current officers of the Fund are:
Name, Address(1) & Age Position(s) Term of Principal Occupation during past 5 years
with Fund Office Since
---------------------------- ----------------- -------------- ------------------------------------------------
Jodi Levine (34) Treasurer 2004 Associate Director, Bear Stearns Funds
Management Inc.

Thomas R. Westle (50) Secretary 2001 Partner at Blank Rome LLP, a law firm;
previous partner at Spitzer & Feldman P.C., a
law firm, and previous Partner at Battle
Fowler LLP
-------------------
(1) The officers' address is the same as the Fund's.

Code of Ethics

In addition to the Code of Ethics required by Rule 17j-1 of the
Investment Company Act, the Fund has adopted a written Code of Ethics for
Principal Officers of the Fund, which imposes certain ethical standards on each
of the principal executive officers of the Fund.

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, 2003, to each Director of
the Fund. Please note that the Fund has no bonus, profit sharing, pension or
retirement plans.
Total Compensation
Aggregate and From Fund
Director Compensation Fund Complex*
Name of Director Since From Fund Paid to Director

Ralph W. Bradshaw 1998 $0 $0
Glenn W. Wilcox, Sr. 2000 $5,550 $18,900
Andrew A. Strauss 2000 $5,550 $18,900
Edwin Meese III 2001 $4,750 $15,489
Scott B. Rogers 2000 $5,550 $18,900
Thomas H. Lenagh 1987 $5,550 $17,889
Gary Bentz** 2002 $0 $0
--------------------------------------------------------------------------------
* For compensation purposes, Fund Complex refers to CLM, PGF and
Cornerstone Total Return Fund, Inc. all of which were managed by
Cornerstone Advisors during the year ended December 31, 2003.
** Mr. Bentz resigned on February 20, 2004.

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 period for which he was a Director.

The Audit Committee

During the fiscal year ended December 31, 2003, the Audit Committee was
composed of all independent directors, as such term is defined in Section 121A
of the AMEX Rules. The members of the Audit Committee during this period were
Messrs. Wilcox, Lenagh, Strauss, Meese and Rogers. The principal functions of
the Audit Committee include, but are not limited to, (i) the oversight of the
accounting and financial reporting processes of the Fund and its internal
control over financial reporting; (ii) the oversight of the quality and
integrity of the Fund's financial statements and the independent audit thereof;
and (iii) the approval, prior to the engagement of, the Fund's independent
auditors and, in connection therewith, to review and evaluate the
qualifications, independence and performance of the Fund's independent auditors.
The Audit Committee convened two (2) times during the 2003 fiscal year. The
Audit Committee Charter is attached hereto as Exhibit E.

The Audit Committee currently does not have an Audit Committee
Financial Expert, as such term is defined in Section 407 of the Sarbanes-Oxley
Act of 2002. Rather, the Audit Committee members believe that each of their
individual experiences provide the Audit Committee with sufficient experience
and expertise to allow them to perform their duties as members of the Audit
Committee.

The Nominating Committee

The Fund has a standing Nominating Committee which is comprised of
Messrs. Wilcox, Lenagh, Strauss, Meese and Rogers, all of whom are independent
directors of the Fund, as such term is defined in Section 2(a)(19) of the
Investment Company Act and in Section 121A of the AMEX Rules. The Nominating
Committee currently does not have a written charter. The Nominating Committee is
appointed to identify and select qualified individuals to become Board members.
The Nominating Committee seeks candidates that have exhibited strong
decision-making ability, substantial business experience, relevant knowledge of
the mutual fund industry (including closed-end funds), skills or technological
expertise and exemplary personal integrity and reputation. In addition, the
Nominating Committee seeks candidates that have experience and knowledge
involving all of the service providers of a registered investment company.

During the calendar year ended December 31, 2003, the Nominating
Committee met one time. At the February 20, 2004 Nominating Committee Meeting,
the Nominating Committee met and discussed the nomination of all of the
Directors of the Fund for the 2004 Annual Meeting of Stockholders. Each of the
nominees were recommended by Non-interested directors.

Required Vote

Directors are elected by a plurality 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 and will be considered votes cast.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF MESSRS. CLARK, STRAUSS AND WILCOX, SR. AS DIRECTORS OF THE FUND.

AUDIT COMMITTEE REPORT

the Audit Committee discussed with and received the required written disclosures
and confirming letter from Tait, Weller & baker regarding its independence and
has discussed with Tait, Weller & Baker its independence. Based upon the review
and discussions referred to above, the Audit committee recommended to the Board
of Directors that the audited financial statements be included in the Fund's
Annual Report to Stockholders on Form N-CSR for the year ended December 31,
2003.

This Audit Committee Report shall not be deemed incorporated by
reference in any document previously or subsequently filed with the Securities
and Exchange Commission that incorporates by reference all or any portion of
this proxy statement except to the extent that the Fund specifically requests
that the report be specifically incorporated by reference.

The Audit Committee of the Board of Directors has selected Tait, Weller
& Baker to be employed as the Fund's independent certified public accountants to
make the annual audit and to report on, as may be required, the financial
statements which may be filed by the Fund with the Securities and Exchange
Commission during the ensuing year.

AUDIT COMMITTEE

Edwin Meese III
Glenn W. Wilcox, Sr.
Andrew A. Strauss
Thomas H. Lenagh
Scott B. Rogers

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

The Fund's independent public accountant for the calendar year ended
December 31, 2003, was the firm of Tait, Weller & Baker. The Audit Committee has
selected Tait, Weller & Baker to be the Fund's independent auditor for 2004. The
selection of the Company's independent auditor is not being submitted to
stockholders because there is no legal requirement to do so.

A representative of Tait, Weller & Baker is not expected to be present
at the Annual Meeting but may be available by telephone to respond to
appropriate questions from Stockholders.

Principal Accountant Fees and Services

Aggregate fees for professional services rendered for CLM by Tait,
Weller & Baker as of or for the years ended December 31, 2003 and 2002 were:

2003 2002

Audit Fees $11,000 $11,000
Audit Related Fees ---- ----
Tax Fees $ 2,000 $2,000
All Other fees ---- $2,500

Total $13,000 $15,500
======= =======

All of the services performed by the Fund's independent auditors,
including audit related and non-audit related services, are pre-approved by the
Audit Committee. The Audit Fees for the years ended December 31, 2003 and 2002,
respectively, were for professional services rendered for the audits of the
financial statements of the Fund, reviews, and issuance of consents, and
assistance with review of documents filed with the SEC. Tax Fees for the years

ended December 31, 2003 and 2002 were for services performed in connection with
income tax services other than those directly related to the audit of the income
tax accrual. The amount listed above for "All Other Fees," includes fees
incurred related to accounting research and other special projects.

The Audit Committee has considered and determined that the services
provided by Tait, Weller & Baker are compatible with maintaining Tait, Weller &
Baker's independence. The aggregate fees included in Audit fees are fees billed
for the calendar years for the audit of the Fund's annual financial statements.
The aggregate fees included in each of the other categories are fees billed in
the calendar years. Of the time expended by the Fund's principal accountant to
audit the Fund's financial statements for the calendar year ended December 31,
2003, less than 50% of such time involved work performed by persons other than
the principal accountant's full-time, permanent employees.

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 percent (10%) of the
Fund's common stock, and the Fund's investment manager and its directors and
officers, to file reports of ownership and changes in ownership with the SEC and
the AMEX. The Fund is not aware of anything to the contrary indicating that the
Fund's directors and officers, the Fund's investment manager and its directors
and officers have complied with all applicable filing requirements during the
year ended December 31, 2003.

ITEM IV. ADDITIONAL PROPOSAL TO BE VOTED ON BY PGF'S STOCKHOLDERS WHICH WILL
ONLY TAKE EFFECT IN THE EVENT THAT
ITEM I - PROPOSAL 1 IS NOT APPROVED BY

PGF'S STOCKHOLDERS.

PGF PROPOSAL 2:

ELECTION OF DIRECTORS

At the Meeting, stockholders will be asked to elect two Class I
Directors to hold office until the year 2007 Annual Meeting of Stockholders or
thereafter until each of their respective successors is duly elected and
qualified. The term of office of the Class I Directors, currently consisting of
Messrs. Thomas H. Lenagh and Andrew Strauss, expires at the year 2007 Annual
Meeting of Stockholders. In addition, stockholders are being asked to elect one
Class III Director, Mr. William A. Clark, to hold office until the year 2006
Annual Meeting or thereafter until his respective successor is duly elected and
qualified. If elected, each nominee has consented to serve as a director of the
Fund until his successor is duly elected and qualified.

Each Nominee was considered and recommended by PGF's Nominating
Committee at a meeting held on February 20, 2004.

The following table sets forth the names, addresses, ages and principal
occupations of each of the nominees for election as Directors:

NOMINEES

Directorships held by
Term of Nominee for Director
Position Office Principal Occupation Outside of Fund
Name, Address(1) & Age with Fund Since during past 5 years Complex* Class I
--------------------------------------------------------------------------------------------------------

Non-Interested Nominees to serve until the Year 2007 Annual Meeting of

Stockholders:
Thomas H. Lenagh (81) Director 2001 Chairman of the Board of Director of Investors
Photonics Products First Fund, Inc., The
Group; Independent Adams Express Company
Financial Adviser; and Petroleum and
Director of Cornerstone Resources Corporation
Strategic Value Fund,
Inc. and Cornerstone
Total Return Fund, Inc.

Andrew A. Strauss (50) Director 2000 Attorney and senior Director and Chairman
member of Strauss & of the Nominating and
Associates, P.A., Corporate Governance
Attorneys, Asheville and Committees of Investors
Hendersonville, NC; First Fund, Inc.;
previous President of Director of Memorial
White Knight Healthcare, Mission Hospital
Inc. and LMV Leasing, Foundation, Deerfield
Inc., a wholly owned Episcopal Retirement
subsidiary of Xerox Community and Asheville
Credit Corporation; Symphony.
Director of Cornerstone
Strategic Value Fund,
Inc. and Cornerstone
Total Return Fund, Inc.

Class III Interested Nominee to serve until the Year 2006 Annual Meeting of Stockholders

William A. Clark(58)** Director, 2004 Director and Stockholder Director, Chairman of
Vice of Cornerstone Advisors, the Board and President
President Inc.; Director of of Investors First
Cornerstone Strategic Fund, Inc.
Value Fund, Inc.; former
financial consultant,
Deep Discount Advisors,
Inc.; Former Director of
The Austria Fund, Inc.
------------
(1) The mailing address of each Nominee with respect to Fund Operations is
383 Madison Avenue, 23rd Floor, New York, NY 10179.
* As of December 31, 2003, the Fund Complex is comprised of PGF, CLM and
Cornerstone Total Return Fund, Inc. all of which are managed by
Cornerstone Advisors, Inc., and each nominee served as a member of the
Board of Directors for each Fund in the Fund Complex.
** Mr. Clark is an "interested person" as defined in the Investment
Company Act of 1940 ("Investment Company Act") because of his
affiliation with Cornerstone Advisors.

Remaining Board of Directors

The following tables set forth the names, addresses, ages and principal
occupations of each of the remaining Directors of the Fund.

Class II Non-Interested Directors to serve until the Year 2005 Annual Meeting of Stockholders

Class III Non-Interested Directors to serve until the Year 2006 Annual Meeting of Stockholders

Glenn W. Wilcox, Sr. (72) Director 2000 Chairman of the Board Director and Chairman
and Chief Executive of Audit Committee of
Officer of Wilcox Travel Investors First Fund,
Agency, Inc.; Director Inc.; Director of
and Audit Committee Wachovia Corp.; Board
Chairman of Cornerstone Trustee of Appalachian
Strategic Value Fund, State University;
Inc. and Cornerstone Director, Champion
Total Return Fund, Inc. Industries, Inc.; and
Chairman, Tower
Associates, Inc. (a
real estate venture)
Scott B. Rogers (48) Director 2000 Chief Executive Officer, Chairman and Director,
Asheville Buncombe Recycling Unlimited;
Community Christian Director of A-B Vision
Ministry; and President, Board and
ABCCM Doctor's Medical Interdenominational
Clinic; Director, Faith Ministerial Alliance
Partnerships Inc.;
Appointee, NC Governor's
Commission on Welfare to
Work.; Director of
Cornerstone Strategic
Value Fund, Inc. and
Cornerstone Total Return
Fund, Inc.

Class II Interested Director to serve until the Year 2005 Annual Meeting of Stockholders

Ralph W. Bradshaw (53)** Chairman 1999 President, Cornerstone Director, Investors
of the Advisors; Financial First Fund, Inc.;
Board and Consultant; President Previous Director of
President and Director of The Austria Fund
Cornerstone Total Return
Fund, Inc. and
Cornerstone Strategic
Value Fund, Inc.; Vice
President, Deep Discount
Advisors, Inc.
(1993-1999).
------------
(1) The mailing address of each Nominee with respect to Fund Operations is
383 Madison Avenue, 23rd Floor, New York, NY 10179.
* As of December 31, 2003, the Fund Complex is comprised of PGF, CLM and
Cornerstone Total Return Fund, Inc. all of which are managed by
Cornerstone Advisors, Inc., and each nominee served as a member of the
Board of Directors for each Fund in the Fund Complex.
** Mr. Bradshaw is an "interested person" as defined in the Investment
Company Act of 1940 ("Investment Company Act") because of his
affiliation with Cornerstone Advisors.

Edwin Meese III 0 0
Andrew A. Strauss $1-$10,000 $10,001-$50,000
Thomas H. Lenagh 0 0
Glenn W. Wilcox Sr. $1-$10,000 $10,001-$50,000
Scott B. Rogers 0 0
Interested Directors:
Ralph W. Bradshaw $10,001-$50,000 Over $100,000
William A. Clark $10,001-$50,000 Over $100,000
Gary A. Bentz* $Over $100,000 Over $100,000
* Mr. Bentz resigned on February 20, 2004.

Executive Officers
In addition to Messrs. Bradshaw and Clark, the current officers of the
Fund are:

Term of
Name, Address(1) & Age Position(s) Office Principal Occupation during past 5 years
with Fund Since
--------------------------- ------------- ---------- --------------------------------------------------

Jodi Levine (34) Treasurer 2004 Associate Director, Bear Stearns Funds
Management Inc.

Thomas R. Westle (50) Secretary 2001 Partner at Blank Rome LLP, a law firm; previous
partner at Spitzer & Feldman P.C., a law firm,
and previous Partner at Battle Fowler LLP.
-----------------

(1) The mailing address of each executive officer with respect to Fund
Operations is 383 Madison Avenue, 23rd Floor, New York, NY 10179.

Code of Ethics

Aggregate Total Compensation From Fund
Director Compensation and Fund Complex* Paid to
Name of Director Since From Fund Director
-------------------------------------------------------------------------
Ralph W. Bradshaw 1999 $0 $0
Glenn W. Wilcox, Sr. 2000 $5,550 $18,900
Andrew A. Strauss 2000 $5,550 $18,900
Edwin Meese III 2001 $4,750 $15,489
Scott B. Rogers 2000 $5,550 $18,900
Thomas H. Lenagh 2001 $5,550 $17,889
Gary Bentz** 2002 $0 $0
-------------------------
* For compensation purposes, Fund Complex refers to PGF, CLM and
Cornerstone Total Return Fund, Inc. all of which were managed
by Cornerstone Advisors during the year ended December 31,
2003.
** Mr. Bentz resigned on February 20, 2004.

The Audit Committee

The Nominating Committee

Required Vote

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF MESSRS. LENAGH, STRAUSS AND CLARK AS DIRECTORS OF THE FUND.

AUDIT COMMITTEE REPORT

On February 20, 2004, the Audit Committee met with management to review
and discuss the audited financial statements for the fiscal year ended December
31, 2003. The Audit Committee also conducted discussions with the Fund's
independent auditors, Tait, Weller & Baker, regarding the matters required by
the Statement on Auditing Standards No. 61. As required by Independence
Standards Board Standard No. 1, "Independence discussion with Audit Committees",
the Audit Committee discussed with and received the required written disclosures
and confirming letter from Tait, Weller & baker regarding its independence and
has discussed with Tait, Weller & Baker its independence. Based upon the review
and discussions referred to above, the Audit committee recommended to the Board
of Directors that the audited financial statements be included in the Fund's
Annual Report to Stockholders on Form N-CSR for the year ended December 31,
2003.

AUDIT COMMITTEE

Edwin Meese III
Glenn W. Wilcox, Sr.
Andrew A. Strauss
Thomas H. Lenagh
Scott B. Rogers

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

The Fund's independent public accountant for the calendar year ended
December 31, 2003, was the firm of Tait, Weller & Baker. The Audit Committee has
selected Tait, Weller & Baker to be the Fund's independent auditor for 2004. The
selection of the Company's independent auditor is not being submitted to
Stockholders because there is no legal requirement to do so.

A representative of Tait, Weller & Baker is not expected to be present
at the Annual Meeting but may be available by telephone to respond to
appropriate questions from Stockholders.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Aggregate fees for professional services rendered for PGF by Tait,
Weller & Baker as of or for the years ended December 31, 2003 and 2002 were:

2003 2002

Audit Fees $11,000 $11,000
Audit Related Fees - -
Tax Fees $2,000 $2,000
All Other fees - $2,500
-------- --------
Total $13,000 $15,500
======== ========

All of the services performed by the Fund's independent auditors,
including audit related and non-audit related services, were pre-approved by the
Audit Committee. The Audit Fees for the years ended December 31, 2003 and 2002,
respectively, were for professional services rendered for the audits of the
financial statements of the Fund, reviews, and issuance of consents, and
assistance with review of documents filed with the SEC. Tax Fees for the years
ended December 31, 2003 and 2002 were for services performed in connection with
income tax services other than those directly related to the audit of the income
tax accrual. The amount listed above for "All Other Fees," includes fees
incurred related to accounting research and other special projects.

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%) of the Fund's common
stock, and the Fund's investment manager and its directors and officers, to file
reports of ownership and changes in ownership with the SEC and the AMEX. The
Fund is not aware of anything to the contrary indicating that the Fund's
directors and officers, the Fund's investment manager and its directors and
officers have complied with all applicable filing requirements during the year
ended December 31, 2003.

ITEM V. ADDITIONAL PROPOSAL TO BE VOTED ON BY MGC'S STOCKHOLDERS WHICH WILL
ONLY TAKE EFFECT IN THE EVENT THAT ITEM II - PROPOSAL 2 IS NOT APPROVED
BY MGC'S STOCKHOLDERS.

MGC PROPOSAL 2:

ELECTION OF DIRECTORS

In accordance with MGC's Articles of Incorporation, the Board is
divided into three classes with each class having a three year term and 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
MGC by delaying the replacement of a majority of the Board of Directors.

At the Meeting, stockholders will be asked to elect Messrs. Bradshaw
and Clark as Directors to hold office until the year 2007 Annual Meeting of
Stockholders or thereafter until each of their respective successors are duly
elected and qualified. The nominees for election are considered to be
Non-interested directors because they are not affiliated with the Fund's current
investment adviser, DeAM.

Each Nominee was considered and recommended by MGC's Nominating
Committee at a meeting held on February 19, 2004.

The following table sets forth the names, addresses, ages and principal
occupations of each of the nominees for election as Directors:

INDEPENDENT NOMINEES

Directorships held by
Position Term Principal Occupation Nominee for Director
Name, Address(1) & Age with Fund Since during past 5 years Outside of Fund Complex
------------------------------------------------------------------------------------------------------------

William A. Clark (58) Chairman of 2003 Director and Stockholder Director of Progressive
the Board, of Cornerstone Advisors, Return Fund, Inc.,
President Inc.; former financial Cornerstone Strategic
and Director consultant, Deep Value Fund, Inc. and
Discount Advisors, Inc.; Cornerstone Total
Former Director of The Return Fund, Inc.
Austria Fund, Inc.

Ralph W. Bradshaw (53) Director 2001 President, Cornerstone Director and Chairman
Advisors; Financial of the Board of
Consultant; Vice Directors of
President, Deep Discount Progressive Return
Advisors, Inc. Fund, Inc., Cornerstone
(1993-1999). Strategic Value Fund,
Inc. and Cornerstone
Total Return Fund,
Inc.; Previous Director
of the Austria Fund

----------------------
(1) The mailing address of each Nominee with respect to Fund Operations is
383 Madison Avenue, 23rd Floor, New York, NY 10179.

REMAINING BOARD OF DIRECTORS

The following table sets forth the names, addresses, ages and principal
occupations of each of the remaining members of the Board of Directors:

Term
of Directorships held by
Position Office Principal Occupation Nominee for Director
Name, Address(1) & Age with Fund Since during past 5 years Outside of Fund Complex
------------------------------------------------------------------------------------------------------------

Thomas H. Lenagh (81) Director 2003 Chairman of the Board of Director of Progressive
Photonics Products Return Fund, Inc.,
Group; Independent Cornerstone Strategic
Financial Adviser; Value Fund, Inc. and
Cornerstone Total
Return Fund, Inc., The
Adams Express Company
and Petroleum and
Resources Corporation

Glenn W. Wilcox, Sr. (72) Director and 2002 Chairman of the Board Director and Audit
Chairman of and Chief Executive Committee Chairman of
Audit Officer of Wilcox Travel Progressive Return
Committee Agency; Fund, Inc., Cornerstone
Strategic Value Fund,
Inc. and Cornerstone
Total Return Fund,
Inc.; Director of
Wachovia Corp.; Board
Trustee of Appalachian
State University;
Director, Champion
Industries, Inc.; and
Chairman, Tower
Associates, Inc. (a
real estate venture)

Andrew A. Strauss (50) Director 2002 Attorney and senior Director and Chairman
member of Strauss & of the Nominating and
Associates, P.A., Corporate Governance
Attorneys, Asheville and Committees of Investors
Hendersonville, NC; First Fund, Inc.;
previous President of Director of Memorial
White Knight Healthcare, Mission Hospital
Inc. and LMV Leasing, Foundation and
Inc., a wholly owned Deerfield Episcopal
subsidiary of Xerox Retirement Community;
Credit Corporation; and Asheville Symphony.
Director of Progressive
Return Fund, Inc. and
Cornerstone Total Return
Fund, Inc.

Edwin Meese III (72) Director 2003 Distinguished Fellow, Director, Cornerstone
The Heritage Foundation, Total Return Fund,
Washington D.C.; Inc., Progressive
Distinguished Visiting Return Fund, Inc.,
Fellow at the Hoover Cornerstone Strategic
Institution, Stanford Value Fund, Inc. and
University; Carrington Laboratories
Distinguished Senior Incorporated
Fellow at the Institute
of United States
Studies, University of
London; Senior Adviser,
Revelation LP; Formerly
U.S. Attorney General
under President Ronald
Reagan

(1) The mailing address of each Director with respect to Fund Operations is
383 Madison Avenue, 23rd Floor, New York, NY 10179.

* As of December 31, 2003, the Fund Complex is comprised only of MGC.

Aggregate Dollar Range of Equity
Securities in All Funds Overseen
Dollar Range of Equity by Directors in Fund Complex*
Name Securities in the Fund
------------------------ ------------------------------ ----------------------------------

Edwin Meese III 0 0
Ralph W. Bradshaw $10,000-$50,000 $10,000-$50,000
Andrew A. Strauss $10,001-$50,000 $10,001-$50,000
Thomas H. Lenagh 0 0
Glenn W. Wilcox Sr. 0 0
William A. Clark $50,000-$100,000 $50,000-$100,000

------------

* None of the Directors oversee any other registered investment company
that is advised by DEAM.

Executive Officers

In addition to Mr. Clark, the current officers of the Fund are:

Name, Address(1) & Age Position(s) Term of Principal Occupation during past 5
with Fund Office Since years
------------------------- -------------- -------------- ----------------------------------------

Thomas R. Westle (50) Secretary 2003 Partner of Blank Rome LLP, previous
partner of Spitzer & Feldman P.C.;
Secretary of Progressive Return Fund,
Inc., Cornerstone Total Return Fund,
Inc. and Investors First Fund, Inc.

(1) The mailing address of the executive officer with respect to Fund
operations is 383 Madison Avenue, 23rd Floor, New York, NY 10179.

Aggregate Total Compensation From Fund
Director Compensation and Fund Complex(1) Paid to
Name of Director Since From Fund Director
----------------------------------------------------------------------------------------

Ralph W. Bradshaw 2001 $30,041 $30,041(2)
Glenn W. Wilcox, Sr. 2002 $26,000 $26,000(2)
Andrew A. Strauss 2002 $25,500 $25,500(2)
Edwin Meese III 2003 $9,972 $9,972(2)
William Clark 2003 $9,157 $9,157(2)
Thomas H. Lenagh 2003 $9,972 $9,972(2)
Richard Wood(3) 1987 $28,518 $28,518
Mark P. Naylor(4) 2002 $21,500 $21,500
Robert Kuftinec 2002 $14,054 $14,054

(1) For compensation purposes, Fund Complex refers to MGC only, which was
managed by Deustche Asset Management Inc. during the year ended
December 31, 2003.
(2) These Directors did not oversee any other registered investment
companies that were managed by Deustche Asset Management Inc. during
the calendar year ended December 31, 2003.
(3) As of November 20, 2003, the Board accepted Mr. Wood's resignation.
(4) As of November 20, 2003, the Board accepted Mr. Naylor's resignation.

Each Director attended at least seventy-five (75%) percent or more of
the twelve (12) meetings of the Board of Directors (including regularly
scheduled and special meetings) held during the period for which he was a
Director.

The Audit Committee

During the fiscal year ended December 31, 2003, the Audit Committee was
composed of all independent directors, as such term is defined in Section
2(a)(19) of the Investment Company Act and Section 303.01(B)(2)(a) of the NYSE
Listing Standards. The current members of the Audit Committee are Messrs.
Wilcox, Lenagh, Strauss and Bradshaw. The principal functions of the Audit
Committee include, but are not limited to, (i) the oversight of the accounting
and financial reporting processes of the Fund and its internal control over
financial reporting; (ii) the oversight of the quality and integrity of the
Fund's financial statements and the independent audit thereof; and (iii) the
approval, prior to the engagement of, the Fund's independent auditors and, in
connection therewith, to review and evaluate the qualifications, independence
and performance of the Fund's independent auditors. The Audit Committee convened
four (4) times during the 2003 fiscal year. Each member attended at least
seventy-five (75%) percent or more of the meetings held during the period for
which he was a member. The Audit Committee Charter is attached hereto as
Exhibit G.

The Nominating Committee

The Fund has a standing Nominating Committee which is comprised of
Messrs. Wilcox, Lenagh and Strauss, all of whom are independent directors of the
Fund, as such term is defined in Section 2(a)(19) of the Investment Company Act
and in Section 303.01(B)(2)(a) of the NYSE Listing Standards. The Nominating
Committee currently does not have a written charter. The Nominating Committee

was appointed to identify and select qualified individuals to become Board
members. The Nominating Committee seeks candidates that have exhibited strong
decision-making ability, substantial business experience, relevant knowledge of
the mutual fund industry (including closed-end funds), skills or technological
expertise and exemplary personal integrity and reputation. In addition, the
Nominating Committee seeks candidates that have experience and knowledge
involving all of the service providers of a registered investment company.

The Nominating Committee will consider all nominees recommended by
stockholders of the Fund, so long as stockholders send their recommendations in
writing to the Secretary of the Fund in a manner consistent with the Fund's
By-laws. Currently, the Fund's Bylaws provide that in order for a stockholder to
nominate a candidate for election as a director at an annual meeting of
stockholders or propose business for consideration at such meeting, notice must
generally be given in writing to the Secretary of the Fund at the principal
executive office of the Fund not later than the close of business on the 90th
day nor earlier than the close of business on the 120th day prior to the first
anniversary of the mailing of the notice for the preceding year's annual
meeting. Accordingly, a stockholder nomination or proposal intended to be
considered at the 2005 Annual Meeting must be received by the Secretary after
the close of business on December 27, 2004, and prior to the close of business
on January 26, 2005. Proposals should be mailed to the Fund, to the attention of
the Fund's Secretary, c/o Bear Stearns Funds Management Inc., 383 Madison
Avenue, 23rd Floor, New York, NY 10169. A copy of the Bylaws may be obtained
from the Fund's Secretary by written request to the same address. In addition,
if you wish to have your proposal considered for inclusion in the Fund's 2005
Proxy Statement, we must receive it on or before December 27, 2004.

During the calendar year ended December 31, 2003, the Nominating
Committee met two times. Each member attended at least seventy-five (75%)
percent or more of the meetings held during the period for which he was a
member. At the February 20, 2004 Nominating Committee Meeting, the Nominating
Committee met and discussed the nomination of all of the Directors of the Fund
for the 2004 Annual Meeting of Stockholders. Each of the nominees were
recommended by non-interested directors.

Code of Ethics

Required Vote

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF MESSRS. BRADSHAW AND CLARK AS DIRECTORS OF THE FUND.

AUDIT COMMITTEE REPORT

AUDIT COMMITTEE

Glenn W. Wilcox, Sr.
Andrew A. Strauss
Ralph W. Bradshaw

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

The Fund's independent public accountant for the calendar year ended
December 31, 2003, was the firm of Tait, Weller & Baker. The Fund's independent
auditor for the years prior to 2003 was KPMG, and KPMG had performed services on
behalf of the Fund during the calendar year. The Audit Committee has selected
Tait, Weller & Baker to be the Fund's independent auditor for 2004.

A representative of Tait, Weller & Baker is not expected to be present
at the Annual Meeting but will be available by telephone to respond to
appropriate questions from Stockholders.

Principal Accountant Fees and Services

Aggregate fees for professional services rendered for the Fund by Tait,
Weller & Baker as of or for the years ended December 31, 2003 and 2002 were:

TWB KPMG KPMG
2003 2003 2002

Audit Fees $13,000 N/A $25,500
Audit Related Fees ------ N/A -------
Tax Fees $ 2,000 N/A -------
All Other fees ------ $3,500 $ 3,500
Total $15,000 $3,500 $29,000
======= ====== =======

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%) of the Fund's common
stock, and the Fund's investment manager and its directors and officers, to file
reports of ownership and changes in ownership with the SEC and the NYSE. The
Fund is not aware of anything to the contrary indicating that the Fund's
directors and officers, the Fund's investment manager and its directors and
officers have complied with all applicable filing requirements during the year
ended December 31, 2003.

ADDITIONAL INFORMATION

The Proxy Statement/Prospectus does not contain all of the information
set forth in the registration statements and the exhibits relating thereto which
the Funds have filed with the SEC, under the Securities Act and the Investment
Company Act, to which reference is hereby made.

Each Fund is subject to the informational requirements of the Exchange
Act and in accordance therewith, file reports and other information with the
SEC. Reports, proxy statements, registration statements and other information
filed by each Fund can be inspected and copied at the public reference
facilities of the SEC in Washington, D.C. Copies of such materials also can be
obtained by mail from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, Washington, D.C.
20594, at prescribed rates.

Stockholder Communications with the Board

Each Fund's Board of Directors has adopted a formal process by which
stockholders may communicate with their respective Board. Stockholders who wish
to communicate with a Board may do so by sending written communications
addressed to the Board of Directors of the Fund, at c/o Bear Stearns Fund
Management Inc., 383 Madison Avenue, New York, New York 10179. All
communications will be compiled by the Secretary of the appropriate Fund and
submitted to the Board or the individual Directors on a periodic basis.

It is each Fund's policy that the Directors who are up for election at
the Annual Meeting attend the Annual Meeting, either in person or via telephone.
Not all of the nominees up for election at the 2003 Annual Meeting of
Stockholders attended the 2003 Annual Meeting of Stockholders.

Other Matters to Come Before the Meeting.

The Board of Directors of each Fund is not aware of any matters that
will be presented for action at the Meetings other than the matters set forth
herein. Should any other matters requiring a vote of stockholders arise, the
proxy in the accompanying form will confer upon the person or persons entitled
to vote the shares represented by such proxy the discretionary authority to vote
the shares as to any such other matters in their discretion in the interest of
the respective Fund. PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S)
PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.

By Order of the Boards of Directors of Cornerstone Strategic Value
Fund, Inc., Progressive Return Fund, Inc. and Investors First Fund, Inc.

CORNERSTONE STRATEGIC VALUE FUND, INC.

Ralph W. Bradshaw
President

PROGRESSIVE RETURN FUND, INC.

Ralph W. Bradshaw
President

INVESTORS FIRST FUND, INC.

William A. Clark
President

EXHIBIT A

MERGER AGREEMENT AND PLAN OF REORGANIZATION

THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made as of this __th day of June, 2004, between Progressive Return Fund, Inc.
(the "Target Fund" or "PGF"), a Maryland corporation and a registered investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and Cornerstone Strategic Value Fund, Inc. (the "Acquiring Fund" or "CLM"), a
Maryland corporation and a registered investment company under the 1940 Act. CLM
and PGF shall hereinafter be referred to as "Fund" or the "Funds."

This agreement contemplates a tax-free merger transaction which
qualifies for federal income tax purposes as a reorganization within the meaning
of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the
"Code").

NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the Funds agree as follows:

1. DEFINITIONS

Certain capitalized terms used in this Agreement are specifically
defined herein.

2. BASIC TRANSACTION

2.1. The Merger. On and subject to the terms and conditions of this
Agreement, the Target Fund will merge with and into the Acquiring Fund (the
"Merger") at the Effective Date (as defined in Section 2.3 below) in accordance
with the Maryland General Corporation Law ("MGCL"). CLM shall be the surviving
investment company and PGF shall cease to exist as a separate entity.

Each share of PGF will be converted into shares of Common Stock of CLM
in accordance with Section 5.01 below.

2.2. Actions at Closing. At the closing of the transactions
contemplated by this Agreement on the date thereof (the "Closing Date"), (i) PGF
will deliver to CLM the various certificates and documents referred to in
Article 7 below, (ii) CLM will deliver to PGF the various certificates and
documents referred to in Article 8 below, and (iii) PGF and CLM will jointly
file with the State Department of Assessments and Taxation of Maryland (the
"Department") articles of merger (the "Articles of Merger") and make all other
filings or recordings required by Maryland law in connection with the Merger.

2.3. Effect of Merger. Subject to the requisite approvals of the
shareholders of the Funds, and to the other terms and conditions described
herein, the Merger shall become effective at such time as the Articles of Merger
are accepted for record by the Department or at such later time as is specified
in the Articles of Merger (the "Effective Date") and the separate corporate
existence of PGF shall cease. As promptly as practicable after the Merger, PGF
shall delist its shares from the American Stock Exchange, LLC ("AMEX") and its
registration under the 1940 Act shall be terminated. Any reporting
responsibility of PGF is, and shall remain, the responsibility of PGF up to and
including the Effective Date.

3. REPRESENTATIONS AND WARRANTIES OF PGF

PGF represents and warrants to CLM that the statements contained in
this Article 3 are correct and complete in all material respects as of the
execution of this Agreement on the date hereof. PGF represents and warrants to,
and agrees with, CLM that:

A-1

3.1. Organization. PGF is a corporation duly organized, validly
existing under the laws of the State of Maryland and is in good standing with
the Department, and has the power to own all of its assets and to carry on its
business as it is now being conducted and to carry out this Agreement.

3.2. Registrations and Qualifications. PGF is duly registered under the
1940 Act as a closed-end, diversified management investment company (File No.
005-40528), and such registration has not been revoked or rescinded and is in
full force and effect. PGF has elected and qualified for the special tax
treatment afforded regulated investment companies ("RIC") under Sections 851-855
of the Code at all times since its inception. PGF is qualified as a foreign
corporation in every jurisdiction where required, except to the extent that
failure to so qualify would not have a material adverse effect on PGF.

3.3. Regulatory Consents and Approvals. No consent, approval,
authorization, or order of any court or governmental authority is required for
the consummation by PGF of the transactions contemplated herein, except (i) such
as have been obtained or applied for under the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934 (the "1934 Act"),
and the 1940 Act, (ii) such as may be required by state securities laws and
(iii) such as may be required under Maryland law for the acceptance for record
of the Articles of Merger by the Department.

3.4. Noncontravention. PGF is not, and the execution, delivery and
performance of this Agreement by PGF will not result in, a violation of the laws
of the State of Maryland or of the Articles of Incorporation or the By-laws of
PGF, or of any material agreement, indenture, instrument, contract, lease or
other undertaking to which PGF is a party or by which it is bound, and the
execution, delivery and performance of this Agreement by PGF will not result in
the acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
PGF is a party or by which it is bound.

3.5. Financial Statements. CLM has been furnished with PGF's Annual
Report of Stockholders, as of December 31, 2003, said financial statements
having been examined by Tait, Weller & Baker, independent public auditors. These
financial statements are in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP") and present fairly, in all
material respects, the financial position of PGF as of such date in accordance
with GAAP, and there are no known contingent liabilities of PGF required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein.

3.6. This Section has been left intentionally Blank.

3.7. Qualification, Corporate Power, Authorization of Transaction. PGF
has full power and authority to enter into and perform its obligations under
this Agreement. The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action of its Board of Directors, and,
subject to shareholder approval, this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.

3.8. Legal Compliance. No material litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending (in which service of process has been received) or to its
knowledge threatened against PGF or any properties or assets held by it. PGF
knows of no facts which might form the basis for the institution of such
proceedings which would materially and adversely affect its business and is not
a party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated.

A-2

3.9. Material Contracts. There are no material contracts outstanding to
which PGF is a party that have not been disclosed in the N-14 Registration
Statement (as defined in Section 3.13 below) or will not be otherwise disclosed
to CLM prior to the Effective Date.

3.10. Undisclosed Liabilities. There has not been any material adverse
change in PGF's financial condition, assets, liabilities or business and PGF has
no known liabilities of a material amount, contingent or otherwise, required to
be disclosed in a balance sheet in accordance with GAAP other than those shown
on PGF's statements of assets, liabilities and capital referred to above, those
incurred in the ordinary course of its business as an investment company, and
those incurred in connection with the Merger. Prior to the Effective Date, PGF
will advise CLM in writing of all known liabilities, contingent or otherwise,
whether or not incurred in the ordinary course of business, existing or accrued.
For purposes of this Section 3.10, a decline in net asset value per share of PGF
due to declines in market values of securities in PGF's portfolio or the
discharge of PGF liabilities will not constitute a material adverse change.

3.11. Tax Filings.

(a) PGF has properly and timely filed all Tax Returns required
to be filed by it, all of which were accurately prepared and completed in
material compliance with all applicable laws. PGF has paid all Taxes required to
be paid by it (whether or not shown on a Tax Return) or has properly reserved
for any such Taxes which are not yet due and payable. No audit of PGF by any
taxing authority has ever been conducted, is currently pending or, to the
knowledge of PGF, is threatened. No notice of any proposed Tax audit, or of any
Tax deficiency or adjustment, has been received by PGF, and there is no
reasonable basis for any Tax deficiency or adjustment to be assessed against
PGF. There are no agreements or waivers currently in effect that provide for an
extension of time for the assessment of any Tax against PGF. PGF's Annual Report
of Stockholders fully accrues all Taxes with respect to all periods through the
dates thereof in accordance with GAAP. Since December 31, 2003, PGF has not
incurred any liabilities for Taxes except in the ordinary course of business
consistent with past practices. No proceeding with respect to Taxes is pending
or has been threatened, and no claim has been or is likely to be asserted,
against or with respect to PGF in respect of any Tax.

(b) PGF has disclosed to the Internal Revenue Service on the
appropriate Tax Returns any Reportable Transaction in which PGF has
participated. PGF has retained all documents and other records pertaining to any
Reportable Transaction in which it has participated, including documents and
other records listed in Treasury Regulation Section 1.6011-4(g) and any other
documents or other records which are related to any Reportable Transaction in
which it has participated but not listed in Treasury Regulation Section
1.6011-4(g). Reportable Transaction shall mean any transaction listed in
Treasury Regulation Section 1.6011-4(b).

(c) For purposes of this Agreement, "Tax or Taxes" shall mean
(a) any foreign, federal, state or local income, earnings, profits, gross
receipts, franchise, capital stock, net worth, sales, use, value added,
occupancy, general property, real property, personal property, intangible
property, transfer, excise, payroll, withholding, unemployment compensation,
social security, retirement or other tax of any nature; (b) any foreign,
federal, state or local organization fee, qualification fee, annual report fee,
filing fee, occupation fee, assessment, or other fee or charge of any nature; or
(c) any deficiency, interest or penalty imposed with respect to any of the
foregoing.

(d) For purposes of this Agreement, "Tax Returns" shall mean all
returns and reports, amended returns, information returns, statements,
declarations, estimates, schedules, notices, notifications, forms, elections,
certificates or other documents required to be filed or submitted to any
government body with respect to the determination, assessment, collection or
payment of any Tax or in connection with the administration, implementation or
enforcement of, or compliance with, any Tax.

3.12. Qualification under Subchapter M. For each taxable year of its
operation (including the taxable year ending on the Effective Date), PGF has met
the requirements of Subchapter M of the Code for qualification as a RIC and has

A-3

elected to be treated as such, has been eligible to and has computed its federal
income tax under Section 852 of the Code, and will have distributed
substantially all of its investment company taxable income and net realized
capital gain (as defined in the Code) that has accrued through the Effective
Date.

3.13. Form N-14. The registration statement to be filed by CLM on Form
N-14 relating to CLM common stock to be issued pursuant to this Agreement, and
any supplement or amendment thereto or to the documents therein, as amended (the
"N-14 Registration Statement"), on the effective date of the N-14 Registration
Statement, at the time of the shareholders' meetings referred to in Article 6 of
this Agreement and at the Effective Date, insofar as it relates to PGF (i) shall
have complied or will comply in all material respects with the provisions of the
1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder
and (ii) did not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; and the prospectus included therein
did not or will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this Section 3.13 shall only apply to
statements in, or omissions from, the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by CLM for use in the
N-14 Registration Statement.

3.14. Capitalization.

(a) All issued and outstanding shares of PGF (i) have been offered and
sold in compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws, (ii) are, and on the
Effective Date will be, duly and validly issued and outstanding, fully paid and
non-assessable, and (iii) will be held at the time of the Closing by the persons
and in the amounts set forth in the records of the transfer agent as provided in
Section 6.7. PGF does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of PGF shares, nor is there outstanding any
security convertible into, or exchangeable for, any of PGF shares.

(b) PGF is authorized to issue 100,000,000 shares of stock, par value
$0.001 per share, all of which are classified as common stock and each
outstanding share is fully paid, non-assessable and has full voting rights.

3.15. Books and Records. The books and records of PGF made available to
CLM are substantially true and correct and contain no material misstatements or
omissions with respect to the operations of PGF.

4. REPRESENTATIONS AND WARRANTIES OF CLM

CLM represents and warrants to PGF that the statements contained in
this Article 4 are correct and complete in all material respects as of the
execution of this Agreement on the date hereof. CLM represents and warrants to,
and agrees with, PGF that:

4.1. Organization. CLM is a corporation duly organized, validly
existing under the laws of the State of Maryland and is in good standing with
the Department, and has the power to own all of its assets and to carry on its
business as it is now being conducted and to carry out this Agreement.

4.2. Registrations and Qualifications. CLM is duly registered under the
1940 Act as a closed-end, diversified management investment company (File No.
005-39655) and such registration has not been revoked or rescinded and is in
full force and effect. CLM has elected and qualified for the special tax
treatment afforded RICs under Sections 851-855 of the Code at all times since
its inception. CLM is qualified as a foreign corporation in every jurisdiction
where required, except to the extent that failure to so qualify would not have a
material adverse effect on CLM.

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4.3. Regulatory Consents and Approvals. No consent, approval,
authorization, or order of any court or governmental authority is required for
the consummation by CLM of the transactions contemplated herein, except (i) such
as have been obtained or applied for under the 1933 Act, the 1934 Act and the
1940 Act, (ii) such as may be required by state securities laws and (iii) such
as may be required under Maryland law for the acceptance for record of the
Articles of Merger by the Department.

4.4. Noncontravention. CLM is not, and the execution, delivery and
performance of this Agreement by CLM will not result, in violation of the laws
of the State of Maryland or of the Articles of Incorporation or the By-laws of
CLM, or of any material agreement, indenture, instrument, contract, lease or
other undertaking to which CLM is a party or by which it is bound, and the
execution, delivery and performance of this Agreement by CLM will not result in
the acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
CLM is a party or by which it is bound.

4.5. Financial Statements. PGF has been furnished with CLM's Annual
Report to Stockholders as of December 31, 2003, said financial statements having
been examined by Tait, Weller & Baker, independent public auditors. These
financial statements are in accordance with GAAP and present fairly, in all
material respects, the financial position of CLM as of such date in accordance
with GAAP, and there are no known contingent liabilities of CLM required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein.

4.6. This Section has been intentionally left blank.

4.7. Qualification, Corporate Power, Authorization of Transaction. CLM
has full power and authority to enter into and perform its obligations under
this Agreement. The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action of its Board of Directors, and,
subject to shareholder approval, this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.

4.8. Legal Compliance. No material litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against CLM or any properties
or assets held by it. CLM knows of no facts which might form the basis for the
institution of such proceedings which would materially and adversely affect its
business and is not a party to or subject to the provisions of any order, decree
or judgment of any court or governmental body which materially and adversely
affects its business or its ability to consummate the transactions herein
contemplated.

4.9. Material Contracts. There are no material contracts outstanding to
which CLM is a party that have not been disclosed in the N-14 Registration
Statement or will not be otherwise disclosed to PGF prior to the Effective Date.

4.10. Undisclosed Liabilities. Since entering into this Agreement,
there has not been any material adverse change in CLM's financial condition,
assets, liabilities, or business and CLM has no known liabilities of a material
amount, contingent or otherwise, required to be disclosed in a balance sheet
with GAAP other than those shown on CLM's statements of assets, liabilities and
capital referred to above, those incurred in the ordinary course of its business
as an investment company since 1989, and those incurred in connection with the
Merger. Prior to the Effective Date, CLM will advise PGF in writing of all known
liabilities, contingent or otherwise, whether or not incurred in the ordinary
course of business, existing or accrued. For purposes of this Section 4.10, a
decline in net asset value per share of CLM due to declines in market values of
securities in CLM's portfolio or the discharge of CLM liabilities will not
constitute a material adverse change.

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4.11. Tax Filings.

(a) CLM has properly and timely filed all Tax Returns required
to be filed by it, all of which were accurately prepared and completed in
material compliance with all applicable laws. CLM has paid all Taxes required to
be paid by it (whether or not shown on a Tax Return) or has properly reserved
for any such Taxes which are not yet due and payable. No audit of CLM by any
taxing authority has ever been conducted, is currently pending or, to the
knowledge of CLM, is threatened. No notice of any proposed Tax audit, or of any
Tax deficiency or adjustment, has been received by CLM, and there is no
reasonable basis for any Tax deficiency or adjustment to be assessed against
CLM. There are no agreements or waivers currently in effect that provide for an
extension of time for the assessment of any Tax against CLM. CLM's Annual Report
of Stockholders fully accrues all Taxes with respect to all periods through the
dates thereof in accordance with GAAP. Since December 31, 2003, CLM has not
incurred any liabilities for Taxes except in the ordinary course of business
consistent with past practices. No proceeding with respect to Taxes is pending
or has been threatened, and no claim has been or is likely to be asserted,
against or with respect to CLM in respect of any Tax.

(b) CLM has disclosed to the Internal Revenue Service on the
appropriate Tax Returns any Reportable Transaction in which CLM has
participated. CLM has retained all documents and other records pertaining to any
Reportable Transaction in which it has participated, including documents and
other records listed in Treasury Regulation Section 1.6011-4(g) and any other
documents or other records which are related to any Reportable Transaction in
which it has participated but not listed in Treasury Regulation Section
1.6011-4(g). Reportable Transaction shall mean any transaction listed in
Treasury Regulation Section 1.6011-4(b).

4.12. Qualification under Subchapter M. For each taxable year of its
operation, CLM has met the requirements of Subchapter M of the Code for
qualification as a RIC and has elected to be treated as such, has been eligible
to and has computed its federal income tax under Section 852 of the Code, and
will have distributed substantially all of its investment company taxable income
and net realized capital gain (as defined in the Code) that has accrued through
the Effective Date.

4.13. Form N-14. The N-14 Registration Statement, on the effective date
of the N-14 Registration Statement, at the time of the shareholders' meetings
referred to in Section 6 of this Agreement and at the Effective Date, insofar as
it relates to CLM (i) shall have complied or will comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder and (ii) did not or will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
and the prospectus included therein did not or will not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the representations and warranties
in this Section 4.13 shall not apply to statements in, or omissions from, the
N-14 Registration Statement made in reliance upon and in conformity with
information furnished by PGF for use in the N-14 Registration Statement.

4.14. Capitalization.

(a) All issued and outstanding shares of CLM (i) have been offered and
sold in compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws, (ii) are, and on the
Effective Date will be, duly and validly issued and outstanding, fully paid and
non-assessable, and (iii) will be held at the time of the Closing by the persons
and in the amounts set forth in the records of the transfer agent. CLM does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of CLM shares, nor is there outstanding any security convertible
into, or exchangeable for, any of CLM shares.

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(b) CLM is authorized to issue 25,000,000 shares of stock, par value
$0.01 per share, all of which shares are classified as common stock and each
outstanding share of which is fully paid, non-assessable and has full voting
rights.

4.15. Issuance of Stock.

(a) The offer and sale of the shares to be issued pursuant to this
Agreement will be in compliance with all applicable federal and state securities
laws.

(b) At or prior to the Effective Date, CLM will have obtained any and
all regulatory, director and shareholder approvals necessary to issue CLM common
stock.

4.16. Books and Records. The books and records of CLM made available to
PGF are substantially true and correct and contain no material misstatements or
omissions with respect to the operations of CLM.

5. CONVERSION TO CLM COMMON STOCK

5.1. Conversion.

(a) Subject to the requisite approval of the shareholders of the Funds, and the
other terms and conditions contained herein, at the Effective Date, each share
of common stock of PGF will be converted into an equivalent dollar amount of
full and, to the extent possible as defined in (b) below, fractional shares of
CLM common stock, based on the relative net asset value per share of each Fund
at the Valuation Time. The Valuation Time shall be at the close of business on
the Business Day preceding the Effective Date or such other time on that day
when net asset value of the respective Fund would be computed in accordance with
the usual and customary practices of such Fund. A Business Day is a day on which
the AMEX is open for trading. The Effective Date and the day preceding the
Effective Date shall both be Business Days.

(b) Fractional shares of CLM will be issued to PGF stockholders that participate
in PGF's Dividend Reinvestment Plan.

(c) PGF stockholders that do not participate in the PGF Dividend Reinvestment
Plan will not receive fractional shares, rather, CLM's transfer agent will
aggregate all fractional shares, sell the resulting full shares on the AMEX at
the then current market price and remit the proceeds to PGF's stockholders in
proportion to their fractional shares.

5.2. Computation of Net Asset Value. The net asset value per share of
each Fund shall be determined as of the Valuation Time, and no formula will be
used to adjust the net asset value so determined of either of the Fund's to take
into account differences in realized and unrealized gains and losses. The value
of the assets of PGF to be transferred to CLM shall be determined by CLM
pursuant to the principles and procedures consistently utilized by CLM in
valuing its own assets and determining its own liabilities for purposes of the
Merger, which principles and procedures are substantially similar to those
employed by PGF when valuing its own assets and determining its own liabilities.
Such valuation and determination shall be made by CLM in cooperation with PGF
and shall be confirmed in writing by CLM to PGF. The net asset value per share
of CLM common stock shall be determined in accordance with such procedures, and
CLM shall certify the computations involved.

5.3. Issuance of CLM Common Stock. CLM shall issue to the shareholders
of PGF separate certificates or share deposit receipts for CLM common stock by
delivering the certificates or share deposit receipts evidencing ownership of
CLM common stock to American Stock Transfer & Trust Co., as the transfer agent
and registrar for CLM common stock.

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5.4. Surrender of PGF Stock Certificates. With respect to any PGF
shareholder holding certificates representing shares of the common stock of PGF
as of the Effective Date, and subject to CLM being informed thereof in writing
by PGF, CLM will not permit such shareholder to receive new certificates
evidencing ownership of CLM common stock until such shareholder has surrendered
his or her outstanding certificates evidencing ownership of the common stock of
PGF or, in the event of lost certificates, posted adequate bond. PGF will
request its shareholders to surrender their outstanding certificates
representing certificates of the common stock of PGF or post adequate bond
therefor. Dividends payable to holders of record of shares of CLM as of any date
after the Effective Date and prior to the exchange of certificates by any
shareholder of PGF shall be paid to such shareholder, without interest; however,
such dividends shall not be paid unless and until such shareholder surrenders
his or her stock certificates of PGF for exchange.

6. COVENANTS OF THE FUNDS

6.1. Shareholders' Meetings.

(a) Each Fund shall hold a meeting of its respective shareholders for
the purpose of considering the Merger as described herein, which meeting has
been called by each party for June 10, 2004, and any adjournments thereof.

(b) Each Fund agrees to mail to each of its respective shareholders of
record entitled to vote at the meeting of shareholders at which action is to be
considered regarding the Merger, in sufficient time to comply with requirements
as to notice thereof, a combined Proxy Statement/Prospectus which complies in
all material respects with the applicable provisions of Section 14(a) of the
1934 Act and Section 20(a) of the 1940 Act, and the rules and regulations,
respectively, thereunder.

6.2. Operations in the Normal Course. Each Party covenants to operate
its business in the ordinary course between the date hereof and the Effective
Date, it being understood that such ordinary course of business will include (i)
the declaration and payment of customary dividends and other distributions and
(ii) in the case of PGF, preparing for its deregistration, except that the
distribution of dividends pursuant to Sections 7.11 and 8.9 of this Agreement
shall not be deemed to constitute a breach of the provisions of this Section
6.2.

6.3. Articles of Merger. The Funds agree that, as soon as practicable
after satisfaction of all conditions to the Merger, they will jointly file
executed Articles of Merger with the Department and make all other filings or
recordings required by Maryland law in connection with the Merger.

6.4. Regulatory Filings.

(a) PGF undertakes that, if the Merger is consummated, it will file, or
cause its agents to file, an application pursuant to Section 8(f) of the 1940
Act for an order declaring that PGF has ceased to be a RIC.

(b) CLM will file the N-14 Registration Statement with the SEC and will
use its best efforts to ensure that the N-14 Registration Statement becomes
effective as promptly as practicable. PGF agrees to cooperate fully with CLM,
and will furnish to CLM the information relating to itself to be set forth in
the N-14 Registration Statement as required by the 1933 Act, the 1934 Act, the
1940 Act, and the rules and regulations thereunder and the state securities or
blue sky laws.

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6.5. Preservation of Assets. CLM agrees that it has no plan or
intention to sell or otherwise dispose of the assets of PGF to be acquired in
the Merger, except for dispositions made in the ordinary course of business.

6.6. [Intentionally omitted.]

6.7. Shareholder List. Prior to the Effective Date, PGF shall have made
arrangements with its transfer agent to deliver to CLM, a list of the names and
addresses of all of the shareholders of record of PGF on the Effective Date and
the number of shares of common stock of PGF owned by each such shareholder,
certified by PGF's transfer agent or President to the best of their knowledge
and belief.

6.8. Delisting, Termination of Registration as an Investment Company.
PGF agrees that the (i) delisting of the shares of PGF from the AMEX and (ii)
termination of its registration as a RIC will be effected in accordance with
applicable law as soon as practicable following the Effective Date.

7. CONDITIONS PRECEDENT TO OBLIGATIONS OF CLM

The obligations of CLM hereunder shall be subject to the following
conditions:

7.1. Approval of Merger. This Agreement shall have been adopted by the
affirmative vote of the holders of a majority of the shares of common stock of
CLM issued and outstanding and entitled to vote thereon and the affirmative vote
of the holders of a majority of the shares of common stock of PGF issued and
outstanding and entitled to vote thereon; and PGF shall have delivered to CLM a
copy of the resolutions approving this Agreement adopted by its Board of
Directors and shareholders, certified by its secretary.

7.2. Certificates and Statements by PGF.

(a) PGF shall have furnished a statement of assets, liabilities and
capital, together with a schedule of investments with their respective dates of
acquisition and tax costs, certified on its behalf by its President (or any Vice
President) and its Treasurer, and a certificate executed by both such officers,
dated the Effective Date, certifying that there has been no material adverse
change in its financial position since the Agreement was entered into, other
than changes in its portfolio securities since that date or changes in the
market value of its portfolio securities.

(b) PGF shall have furnished to CLM a certificate signed by its
President (or any Vice President), dated the Effective Date, certifying that as
of the Effective Date, all representations and warranties made in this Agreement
are true and correct in all material respects as if made at and as of such date
and each has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied at or prior to such dates.

(c) PGF shall have delivered to CLM a letter from Tait, Weller & Baker,
dated the Effective Date, stating that such firm has performed a limited review
of the income Tax Returns for the period ended December 31, 2003, and that based
on such limited review, nothing came to their attention which caused them to
believe that such income Tax Returns did not properly reflect, in all material
respects, the income Taxes of PGF for the period covered thereby; and that for
the period from December 31, 2003 to and including the Effective Date and for
any taxable year ending upon the Effective Date, such firm has performed a
limited review to ascertain the amount of such applicable Taxes and has
determined that either such amount has been paid or reserves have been
established for payment of such Taxes, this review to be based on unaudited
financial data; and that based on such limited review, nothing has come to their
attention which caused them to believe that the Taxes paid or reserves set aside
for payment of such Taxes were not adequate in all material respects for the
satisfaction of such Taxes for the period from December 31, 2003, to and
including the Effective Date and for any taxable year ending upon the Effective
Date or that PGF would not continue to qualify as a RIC for federal income tax
purposes.

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7.3. Absence of Litigation. There shall be no material litigation
pending with respect to the matters contemplated by this Agreement.

7.4. Legal Opinions.

(a) CLM shall have received an opinion of Blank Rome LLP, as counsel to PGF, in
form and substance reasonably satisfactory to CLM and dated the Effective Date.
(b) CLM shall have received an opinion from Blank Rome LLP, as counsel
to CLM, dated the Effective Date, to the effect that for federal income tax
purposes the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code.

7.5. Auditor's Consent and Certification. CLM shall have received from
Tait, Weller & Baker a letter dated as of the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Effective Date, in form and substance satisfactory to CLM, to the effect that
(i) they are independent public auditors with respect to PGF within the meaning
of the 1933 Act and the applicable published rules and regulations thereunder;
and (ii) in their opinion, the financial statements and supplementary
information of PGF included or incorporated by reference in the N-14
Registration Statement and reported on by them comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and the
published rules and regulations thereunder.

7.6. Liabilities. The assets or liabilities of PGF to be transferred to
CLM shall not include any assets or liabilities which CLM, by reason of
limitations in its Registration Statement or Articles of Incorporation, may not
properly acquire or assume. CLM does not anticipate that there will be any such
assets or liabilities but CLM will notify PGF if any do exist and will reimburse
PGF for any reasonable transaction costs incurred by PGF for the liquidation of
such assets and liabilities.

7.7. Effectiveness of N-14 Registration Statement. The N-14
Registration Statement shall have become effective under the 1933 Act and no
stop order suspending such effectiveness shall have been instituted or, to the
knowledge of CLM, contemplated by the SEC.

7.8. Regulatory Filings.

(a) This Section has been intentionally left blank.

(b) This Section has been intentionally left blank.

7.9. Administrative Rulings, Proceedings. The SEC shall not have issued
an unfavorable advisory report under Section 25(b) of the 1940 Act, nor
instituted or threatened to institute any proceeding seeking to enjoin
consummation of the Merger under Section 25(c) of the 1940 Act; no other legal,
administrative or other proceeding shall be instituted or threatened which would
materially affect the financial condition of PGF or would prohibit the Merger.

7.10. Satisfaction of Progressive Return Fund, Inc. All proceedings
taken by PGF and its counsel in connection with the Merger and all documents
incidental thereto shall be satisfactory in form and substance to CLM.

7.11. Dividends. Prior to the Effective Date, PGF shall have declared
and paid a dividend or dividends which, together with all such previous
dividends, shall have the effect of distributing to its shareholders
substantially all of its net investment company taxable income that has accrued
through the Effective Date, if any (computed without regard to any deduction of
dividends paid), and substantially all of its net capital gain, if any, realized
through the Effective Date.

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7.12. Custodian's Certificate. PGF's custodian shall have delivered to
CLM a certificate identifying all of the assets of PGF held or maintained by
such custodian as of the Valuation Time.

7.13. Books and Records. PGF's transfer agent shall have provided to
CLM (i) the originals or true copies of all of the records of PGF in the
possession of such transfer agent as of the Exchange Date, (ii) a certificate
setting forth the number of shares of PGF outstanding as of the Valuation Time,
and (iii) the name and address of each holder of record of any shares and the
number of shares held of record by each such shareholder.

8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PGF

The obligations of PGF hereunder shall be subject to the following
conditions:

8.1. Approval of Merger. This Agreement shall have been adopted, by the
affirmative vote of the holders of a majority of the shares of common stock of
PGF issued and outstanding and entitled to vote thereon and the affirmative vote
of the holders of a majority of the shares of common stock of CLM issued and
outstanding and entitled to vote thereon; and that CLM shall have delivered to
PGF a copy of the resolutions approving this Agreement adopted by its Board of
Directors and shareholders, certified by its secretary.

8.2. Certificates and Statements by CLM.

(a) CLM shall have furnished a statement of assets, liabilities and
capital, together with a schedule of investments with their respective dates of
acquisition and tax costs, certified on its behalf by its President (or any Vice
President) and its Treasurer, and a certificate executed by both such officers,
dated the Effective Date, certifying that there has been no material adverse
change in its financial position since the Agreement was entered into, other
than changes in its portfolio securities since that date or changes in the
market value of its portfolio securities.

(b) CLM shall have furnished to PGF a certificate signed by its
President (or any Vice President), dated the Effective Date, certifying that as
of the Effective Date, all representations and warranties made in this Agreement
are true and correct in all material respects as if made at and as of such date
and each has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied at or prior to such dates.

(c) CLM shall have delivered to PGF a letter from Tait, Weller & Baker,
dated the Effective Date, stating that such firm has performed a limited review
of the income Tax Returns for the period ended December 31, 2003, and that based
on such limited review, nothing came to their attention which caused them to
believe that such income Tax Returns did not properly reflect, in all material
respects, the income Taxes of CLM for the period covered thereby; and that for
the period from December 31, 2003 to and including the Effective Date, such firm
has performed a limited review to ascertain the amount of such applicable Taxes,
and has determined that either such amount has been paid or reserves established
for payment of such Taxes, this review to be based on unaudited financial data;
and that based on such limited review, nothing has come to their attention which
caused them to believe that the Taxes paid or reserves set aside for payment of
such Taxes were not adequate in all material respects for the satisfaction of
Taxes for the period from December 31, 2003, to and including the Effective Date
or that CLM would not continue to qualify as a RIC for federal income tax
purposes.

8.3. Absence of Litigation. There shall be no material litigation
pending with respect to the matters contemplated by this Agreement.

8.4. Legal Opinions.

(a) PGF shall have received an opinion from Blank Rome LLP, as counsel to CLM,
in form and substance reasonably satisfactory to PGF and dated the Effective
Date.

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(b) PGF shall have received an opinion from Blank Rome LLP dated the
Effective Date, to the effect that for federal income tax purposes the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code.

8.5. Auditor's Consent and Certification. PGF shall have received from
Tait, Weller & Baker a letter dated as of the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Effective Date, in form and substance satisfactory to PGF, to the effect that
(i) they are independent public auditors with respect to CLM within the meaning
of the 1933 Act and the applicable published rules and regulations thereunder;
and (ii) in their opinion, the financial statements and supplementary
information of CLM incorporated by reference in the N-14 Registration Statement
and reported on by them comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder.

8.6. Effectiveness of N-14 Registration Statement. The N-14
Registration Statement shall have become effective under the 1933 Act and no
stop order suspending such effectiveness shall have been instituted or, to the
knowledge of PGF, contemplated by the SEC.

8.7. Regulatory Filings.

(a) This Section has been intentionally left blank.

(b) The SEC shall not have issued an unfavorable advisory report under
Section 25(b) of the 1940 Act, nor instituted or threatened to institute any
proceeding seeking to enjoin consummation of the Merger under Section 25(c) of
the 1940 Act; no other legal, administrative or other proceeding shall be
instituted or threatened which would materially affect the financial condition
of PGF or would prohibit the Merger.

(c) CLM shall have received from any relevant state securities
administrator such order or orders as are reasonably necessary or desirable
under the 1933 Act, the 1934 Act, the 1940 Act, and any applicable state
securities or blue sky laws in connection with the transactions contemplated
hereby, and that all such orders shall be in full force and effect.

8.8. Satisfaction of PGF. All proceedings taken by CLM and its counsel
in connection with the Merger and all documents incidental thereto shall be
satisfactory in form and substance to PGF.

8.9. Dividends. Prior to the Effective Date, CLM shall have declared
and paid a dividend or dividends which, together with all such previous
dividends, shall have the effect of distributing to its shareholders
substantially all of its net investment company taxable income that has accrued
through the Effective Date, if any (computed without regard to any deduction of
dividends paid), and substantially all of its net capital gain, if any, realized
through the Effective Date.

9. PAYMENT OF EXPENSES

9.1. Allocation. All expenses incurred in connection with the Merger
shall be allocated to the respective Fund which incurred the expense. Such
expenses shall include, but not be limited to, all costs related to the
preparation and distribution of the N-14 Registration Statement, proxy
solicitation expenses, SEC registration fees, and NYSE listing fees. Neither of
the Funds owes any broker's or finder's fees in connection with the transactions
provided for herein.

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10. COOPERATION FOLLOWING EFFECTIVE DATE

In case at any time after the Effective Date any further action is
necessary to carry out the purposes of this Agreement, each Fund will take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party may reasonably request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled to
indemnification as described below). PGF acknowledges and agrees that from and
after the Effective Date, CLM shall be entitled to possession of all documents,
books, records, agreements and financial data of any sort pertaining to PGF.

11. INDEMNIFICATION

11.1. PGF. CLM agrees to indemnify and hold harmless PGF and each of
PGF's directors and officers from and against any and all losses, claims,
damages, liabilities or expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of investigation) to which jointly
and severally, PGF or any of its directors or officers may become subject,
insofar as any such loss, claim, damage, liability or expense (or actions with
respect thereto) arises out of or is based on any breach by CLM of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.

11.2. CLM. PGF agrees to indemnify and hold harmless CLM and each of
CLM's directors and officers from and against any and all losses, claims,
liabilities or expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of investigation) to which jointly
and severally, CLM or any of its directors or officers may become subject,
insofar as any such loss, claim, damage, liability or expense (or actions with
respect thereto) arises out of or is based on any breach by PGF of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.

12. TERMINATION, POSTPONEMENT AND WAIVERS

12.1. Termination.

(a) Notwithstanding anything to the contrary in this Agreement, this
Agreement may be terminated and the Merger abandoned at any time (whether before
or after adoption by the shareholders of each Fund) prior to the Effective Date,
or the Effective Date may be postponed by: (i) mutual agreement of the Funds'
Board of Directors; (ii) the Board of Directors of CLM if any of the obligations
of PGF set forth in this Agreement has not been fulfilled or waived by such
Board or if PGF has made a material and intentional misrepresentation herein or
in connection herewith; or (iii) the Board of Directors of PGF if any of the
obligations of CLM set forth in this Agreement has not been fulfilled or waived
by such Board or if CLM has made a material and intentional misrepresentation
herein or in connection herewith.

(b) If the transaction contemplated by this Agreement shall not have
been consummated by July 30, 2004, this Agreement automatically shall terminate
on that date, unless a later date is mutually agreed to by the Boards of
Directors of each Fund.

(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the Agreement shall become void and have no further effect,
and there shall not be any liability hereunder on the part of either Fund or
their directors or officers, except for any such material breach or intentional
misrepresentation, as to each of which all remedies at law or in equity of the
party adversely affected shall survive.

12.2. Waiver. At any time prior to the Effective Date, any of the terms
or conditions of this Agreement may be waived by the Board of Directors of
either PGF or CLM (whichever is entitled to the benefit thereof), if, in the
judgment of such Board after consultation with its counsel, such action or
waiver will not have a material adverse effect on the benefits intended in this
Agreement to the shareholders of their respective fund, on behalf of which such
action is taken.

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12.3. Expiration of Representations and Warranties.

(a) The respective representations and warranties contained in Articles
3 and 4 of this Agreement shall expire with, and be terminated by, the
consummation of the Merger, and neither Fund nor any of their officers,
directors, agents or shareholders shall have any liability with respect to such
representations or warranties after the Effective Date. This provision shall not
protect any officer, director, agent or shareholder of a Fund against any
liability to the entity for which that officer, director, agent or shareholder
so acts or to its shareholders to which that officer, director, agent or
shareholder would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties in the conduct of
such office.

(b) If any order or orders of the SEC with respect to this Agreement
shall be issued prior to the Effective Date and shall impose any terms or
conditions which are determined by action of the Boards of Directors of a Fund
to be acceptable, such terms and conditions shall be binding as if a part of
this Agreement without further vote or approval of the shareholders of a Fund,
unless such terms and conditions shall result in a change in the method of
computing the number of shares of CLM common stock to be issued pursuant to this
Agreement, in which event, unless such terms and conditions shall have been
included in the proxy solicitation materials furnished to the shareholders of
the Fund prior to the meetings at which the Merger shall have been approved,
this Agreement shall not be consummated and shall terminate unless the Funds
call special meetings of shareholders at which such conditions so imposed shall
be submitted for approval.

13. MISCELLANEOUS

13.1. Transfer Restriction. Pursuant to Rule 145 under the 1933 Act,
and in connection with the issuance of any shares to any person who at the time
of the Merger is, to its knowledge, an affiliate of a party to the Merger
pursuant to Rule 145(c), CLM will cause to be affixed upon the certificate(s)
issued to such person (if any) a legend as follows:

THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT TO PROGRESSIVE RETURN FUND, INC. (OR ITS STATUTORY SUCCESSOR)
UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE
UNDER THE SECURITIES ACT OF 1933 OR (II) IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE FUND, SUCH REGISTRATION IS NOT REQUIRED.

and, further, that stop transfer instructions will be issued to CLM's transfer
agent with respect to such shares. PGF will provide CLM on the Effective Date
with the name of any PGF Shareholder who is to the knowledge of PGF an affiliate
of it on such date.

13.2. Material Provisions. All covenants, agreements, representations
and warranties made under this Agreement and any certificates delivered pursuant
to this Agreement shall be deemed to have been material and relied upon by each
Fund, notwithstanding any investigation made by them or on their behalf.

13.3. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:

If to CLM:
Ralph Bradshaw, President
c/o Bear Stearns Funds Management Inc.
Cornerstone Strategic Value Fund, Inc.
383 Madison Avenue
New York, New York 10179

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With copies to:
Thomas R. Westle, Esq.
Blank Rome LLP
405 Lexington Avenue, 24th Floor
New York, New York 10174

If to PGF:

Ralph Bradshaw, President
c/o Bear Stearns Funds Management Inc.
Progressive Return Fund, Inc.
383 Madison Avenue
New York, New York 10179

With copies to:
Thomas R. Westle, Esq.
Blank Rome LLP
405 Lexington Avenue, 24th Floor
New York, New York 10174

Any Party may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims and other communications hereunder are to be delivered by giving the
other Fund notice in the manner herein set forth.

13.4. Amendments. This Agreement may be amended, modified or
supplemented in such manner as may be mutually agreed upon in writing by the
authorized officers of PGF and CLM; provided, however, that following the
meeting of PGF and CLM shareholders to approve the Merger, no such amendment may
have the effect of changing the provisions for determining the number of CLM
shares to be issued to PGF shareholders under this Agreement to the detriment of
such shareholders without their further approval.

13.5. Headings. The Article headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

13.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.

13.7. Enforceability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

13.8. Successors and Assigns. This Agreement shall bind and inure to
the benefit of a Fund and its respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder shall be
made by any party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than a Fund and its shareholders of the
Funds and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.

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13.9. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with the laws of the State of Maryland, without
regard to its principles of conflicts of law.

IN WITNESS WHEREOF, each Fund has caused this Agreement to be executed
by its President.

PROGRESSIVE RETURN FUND, INC.

By:
--------------------------------------
Name: Ralph W. Bradshaw
Title: President

CORNERSTONE STRATEGIC VALUE FUND, INC.

By:
--------------------------------------
Name: Ralph W. Bradshaw
Title: President

A-16

EXHIBIT B

MERGER AGREEMENT AND PLAN OF REORGANIZATION

THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made as of this __th day of June, 2004, between Investors First Fund, Inc. (the
"Target Fund" or "MGC"), a Maryland corporation and a registered investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and Cornerstone Strategic Value Fund, Inc. (the "Acquiring Fund" or "CLM"), a
Maryland corporation and a registered investment company under the 1940 Act. CLM
and MGC shall hereinafter be referred to as "Fund" or "Funds."

NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the Funds agree as follows:

1. DEFINITIONS

Certain capitalized terms used in this Agreement are specifically
defined herein.

2. BASIC TRANSACTION

Each share of MGC will be converted into shares of Common Stock of CLM
in accordance with Section 5.01 below.

2.2. Actions at Closing. At the closing of the transactions
contemplated by this Agreement on the date thereof (the "Closing Date"), (i) MGC
will deliver to CLM the various certificates and documents referred to in
Article 7 below, (ii) CLM will deliver to MGC the various certificates and
documents referred to in Article 8 below, and (iii) MGC and CLM will jointly
file with the State Department of Assessments and Taxation of Maryland (the
"Department") articles of merger (the "Articles of Merger") and make all other
filings or recordings required by Maryland law in connection with the Merger.

2.3. Effect of Merger. Subject to the requisite approvals of the
shareholders of the Funds, and to the other terms and conditions described
herein, the Merger shall become effective at such time as the Articles of Merger
are accepted for record by the Department or at such later time as is specified
in the Articles of Merger (the "Effective Date") and the separate corporate
existence of MGC shall cease. As promptly as practicable after the Merger, MGC
shall delist its shares from the New York Stock Exchange ("NYSE") and its
registration under the 1940 Act shall be terminated. Any reporting
responsibility of MGC is, and shall remain, the responsibility of MGC up to and
including the Effective Date.

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3. REPRESENTATIONS AND WARRANTIES OF MGC

MGC represents and warrants to CLM that the statements contained in
this Article 3 are correct and complete in all material respects as of the
execution of this Agreement on the date hereof. MGC represents and warrants to,
and agrees with, CLM that:

3.1. Organization. MGC is a corporation duly organized, validly
existing under the laws of the State of Maryland and is in good standing with
the Department, and has the power to own all of its assets and to carry on its
business as it is now being conducted and to carry out this Agreement.

3.2. Registrations and Qualifications. MGC is duly registered under the
1940 Act as a closed-end, diversified management investment company (File No.
005-39284), and such registration has not been revoked or rescinded and is in
full force and effect. MGC has elected and qualified for the special tax
treatment afforded regulated investment companies ("RIC") under Sections 851-855
of the Code at all times since its inception. MGC is qualified as a foreign
corporation in every jurisdiction where required, except to the extent that
failure to so qualify would not have a material adverse effect on MGC.

3.3. Regulatory Consents and Approvals. No consent, approval,
authorization, or order of any court or governmental authority is required for
the consummation by MGC of the transactions contemplated herein, except (i) such
as have been obtained or applied for under the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934 (the "1934 Act"),
and the 1940 Act, (ii) such as may be required by state securities laws and
(iii) such as may be required under Maryland law for the acceptance for record
of the Articles of Merger by the Department.

3.4. Noncontravention. MGC is not, and the execution, delivery and
performance of this Agreement by MGC will not result in, a violation of the laws
of the State of Maryland or of the Articles of Incorporation or the By-laws of
MGC, or of any material agreement, indenture, instrument, contract, lease or
other undertaking to which MGC is a party or by which it is bound, and the
execution, delivery and performance of this Agreement by MGC will not result in
the acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
MGC is a party or by which it is bound.

3.5. Financial Statements. CLM has been furnished with MGC's Annual
Report of Stockholders, as of December 31, 2003, said financial statements
having been examined by Tait, Weller & Baker, independent public auditors. These
financial statements are in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP") and present fairly, in all
material respects, the financial position of MGC as of such date in accordance
with GAAP, and there are no known contingent liabilities of MGC required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein.

3.6. This Section has been left intentionally Blank.

3.7. Qualification, Corporate Power, Authorization of Transaction. MGC
has full power and authority to enter into and perform its obligations under
this Agreement. The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action of its Board of Directors, and,
subject to shareholder approval, this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.

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proceedings which would materially and adversely affect its business and is not
a party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated.

3.9. Material Contracts. There are no material contracts outstanding to
which MGC is a party that have not been disclosed in the N-14 Registration
Statement (as defined in Section 3.13 below) or will not be otherwise disclosed
to CLM prior to the Effective Date.

3.10. Undisclosed Liabilities. There has not been any material adverse
change in MGC's financial condition, assets, liabilities or business and MGC has
no known liabilities of a material amount, contingent or otherwise, required to
be disclosed in a balance sheet in accordance with GAAP other than those shown
on MGC's statements of assets, liabilities and capital referred to above, those
incurred in the ordinary course of its business as an investment company, and
those incurred in connection with the Merger. Prior to the Effective Date, MGC
will advise CLM in writing of all known liabilities, contingent or otherwise,
whether or not incurred in the ordinary course of business, existing or accrued.
For purposes of this Section 3.10, a decline in net asset value per share of MGC
due to declines in market values of securities in MGC's portfolio or the
discharge of MGC liabilities will not constitute a material adverse change.

3.11. Tax Filings.

(a) MGC has properly and timely filed all Tax Returns required
to be filed by it, all of which were accurately prepared and completed in
material compliance with all applicable laws. MGC has paid all Taxes required to
be paid by it (whether or not shown on a Tax Return) or has properly reserved
for any such Taxes which are not yet due and payable. No audit of MGC by any
taxing authority has ever been conducted, is currently pending or, to the
knowledge of MGC, is threatened. No notice of any proposed Tax audit, or of any
Tax deficiency or adjustment, has been received by MGC, and there is no
reasonable basis for any Tax deficiency or adjustment to be assessed against
MGC. There are no agreements or waivers currently in effect that provide for an
extension of time for the assessment of any Tax against MGC. MGC's Annual Report
of Stockholders fully accrues all Taxes with respect to all periods through the
dates thereof in accordance with GAAP. Since December 31, 2003, MGC has not
incurred any liabilities for Taxes except in the ordinary course of business
consistent with past practices. No proceeding with respect to Taxes is pending
or has been threatened, and no claim has been or is likely to be asserted,
against or with respect to MGC in respect of any Tax.

(b) MGC has disclosed to the Internal Revenue Service on the
appropriate Tax Returns any Reportable Transaction in which MGC has
participated. MGC has retained all documents and other records pertaining to any
Reportable Transaction in which it has participated, including documents and
other records listed in Treasury Regulation Section 1.6011-4(g) and any other
documents or other records which are related to any Reportable Transaction in
which it has participated but not listed in Treasury Regulation Section
1.6011-4(g). Reportable Transaction shall mean any transaction listed in
Treasury Regulation Section 1.6011-4(b).

B-3

3.12. Qualification under Subchapter M. For each taxable year of its
operation (including the taxable year ending on the Effective Date), MGC has met
the requirements of Subchapter M of the Code for qualification as a RIC and has
elected to be treated as such, has been eligible to and has computed its federal
income tax under Section 852 of the Code, and will have distributed
substantially all of its investment company taxable income and net realized
capital gain (as defined in the Code) that has accrued through the Effective
Date.

3.13. Form N-14. The registration statement to be filed by CLM on Form
N-14 relating to CLM common stock to be issued pursuant to this Agreement, and
any supplement or amendment thereto or to the documents therein, as amended (the
"N-14 Registration Statement"), on the effective date of the N-14 Registration
Statement, at the time of the shareholders' meetings referred to in Article 6 of
this Agreement and at the Effective Date, insofar as it relates to MGC (i) shall
have complied or will comply in all material respects with the provisions of the
1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder
and (ii) did not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; and the prospectus included therein
did not or will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this Section 3.13 shall only apply to
statements in, or omissions from, the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by CLM for use in the
N-14 Registration Statement.

3.14. Capitalization.

(a) All issued and outstanding shares of MGC (i) have been offered and
sold in compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws, (ii) are, and on the
Effective Date will be, duly and validly issued and outstanding, fully paid and
non-assessable, and (iii) will be held at the time of the Closing by the persons
and in the amounts set forth in the records of the transfer agent as provided in
Section 6.7. MGC does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of MGC shares, nor is there outstanding any
security convertible into, or exchangeable for, any of MGC shares.

(b) MGC is authorized to issue 150,000,000 shares of stock, par value
$0.01 per share, all of which are classified as common stock and each
outstanding share is fully paid, non-assessable and has full voting rights.

3.15. Books and Records. The books and records of MGC made available to CLM are
substantially true and correct and contain no material misstatements or
omissions with respect to the operations of MGC.

4. REPRESENTATIONS AND WARRANTIES OF CLM

CLM represents and warrants to MGC that the statements contained in
this Article 4 are correct and complete in all material respects as of the
execution of this Agreement on the date hereof. CLM represents and warrants to,
and agrees with, MGC that:

B-4

4.5. Financial Statements. MGC has been furnished with CLM's Annual
Report to Stockholders as of December 31, 2003, said financial statements having
been examined by Tait, Weller & Baker, independent public auditors. These
financial statements are in accordance with GAAP and present fairly, in all
material respects, the financial position of CLM as of such date in accordance
with GAAP, and there are no known contingent liabilities of CLM required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein.

4.6. This Section has been intentionally left blank.

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capital referred to above, those incurred in the ordinary course of its business
as an investment company since 1989, and those incurred in connection with the
Merger. Prior to the Effective Date, CLM will advise MGC in writing of all known
liabilities, contingent or otherwise, whether or not incurred in the ordinary
course of business, existing or accrued. For purposes of this Section 4.10, a
decline in net asset value per share of CLM due to declines in market values of
securities in CLM's portfolio or the discharge of CLM liabilities will not
constitute a material adverse change.

4.11. Tax Filings.

4.14. Capitalization.

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(b) CLM is authorized to issue 25,000,000 shares of stock, par value
$0.01 per share, all of which are classified as common stock and each
outstanding share is fully paid, non-assessable and has full voting rights.

4.15. Issuance of Stock.

(a) The offer and sale of the shares to be issued pursuant to this
Agreement will be in compliance with all applicable federal and state securities
laws.

(b) At or prior to the Effective Date, CLM will have obtained any and
all regulatory, director and shareholder approvals necessary to issue CLM common
stock.

4.16. Books and Records. The books and records of CLM made available to
MGC are substantially true and correct and contain no material misstatements or
omissions with respect to the operations of CLM.

5. CONVERSION TO CLM COMMON STOCK

5.1. Conversion.

(a) Subject to the requisite approval of the Funds' shareholders, and the other
terms and conditions contained herein, at the Effective Date, each share of
common stock of MGC will be converted into an equivalent dollar amount of full
and, to the extent possible as defined in (b) below, fractional shares of CLM
common stock, based on the relative net asset value per share of each Fund at
the Valuation Time. The Valuation Time shall be at the close of business on the
Business Day preceding the Effective Date or such other time on that day when
net asset value of the respective Fund would be computed in accordance with the
usual and customary practices of such Fund. A Business Day is a day on which the
American Stock Exchange, LLC ("AMEX") is open for trading. The Effective Date
and the day preceding the Effective Date shall both be Business Days.

(b) Fractional shares of CLM will be issued to MGC stockholders that participate
in MGC's Dividend Reinvestment Plan.

(c) MGC stockholders that do not participate in the MGC Dividend Reinvestment
Plan will not receive fractional shares, rather, CLM's transfer agent will
aggregate all fractional shares, sell the resulting full shares on the AMEX at
the then current market price and remit the proceeds to MGC's stockholders in
proportion to their fractional shares.

5.2. Computation of Net Asset Value. The net asset value per share of
the Funds shall be determined as of the Valuation Time, and no formula will be
used to adjust the net asset value so determined of either Fund to take into
account differences in realized and unrealized gains and losses. The value of
the assets of MGC to be transferred to CLM shall be determined by CLM pursuant
to the principles and procedures consistently utilized by CLM in valuing its own
assets and determining its own liabilities for purposes of the Merger, which
principles and procedures are substantially similar to those employed by MGC
when valuing its own assets and determining its own liabilities. Such valuation
and determination shall be made by CLM in cooperation with MGC and shall be
confirmed in writing by CLM to MGC. The net asset value per share of CLM common
stock shall be determined in accordance with such procedures, and CLM shall
certify the computations involved.

B-7

5.3. Issuance of CLM Common Stock. CLM shall issue to the shareholders
of MGC separate certificates or share deposit receipts for CLM common stock by
delivering the certificates or share deposit receipts evidencing ownership of
CLM common stock to American Stock Transfer & Trust Co., as the transfer agent
and registrar for CLM common stock.

5.4. Surrender of MGC Stock Certificates. With respect to any MGC
shareholder holding certificates representing shares of the common stock of MGC
as of the Effective Date, and subject to CLM being informed thereof in writing
by MGC, CLM will not permit such shareholder to receive new certificates
evidencing ownership of CLM common stock until such shareholder has surrendered
his or her outstanding certificates evidencing ownership of the common stock of
MGC or, in the event of lost certificates, posted adequate bond. MGC will
request its shareholders to surrender their outstanding certificates
representing certificates of the common stock of MGC or post adequate bond
therefor. Dividends payable to holders of record of shares of CLM as of any date
after the Effective Date and prior to the exchange of certificates by any
shareholder of MGC shall be paid to such shareholder, without interest; however,
such dividends shall not be paid unless and until such shareholder surrenders
his or her stock certificates of MGC for exchange.

6. COVENANTS OF THE FUNDS

6.1. Shareholders' Meetings.

6.2. Operations in the Normal Course. Each Party covenants to operate
its business in the ordinary course between the date hereof and the Effective
Date, it being understood that such ordinary course of business will include (i)
the declaration and payment of customary dividends and other distributions and
(ii) in the case of MGC, preparing for its deregistration, except that the
distribution of dividends pursuant to Sections 7.11 and 8.9 of this Agreement
shall not be deemed to constitute a breach of the provisions of this Section
6.2.

6.3. Articles of Merger. The Funds' agree that, as soon as practicable
after satisfaction of all conditions to the Merger, they will jointly file
executed Articles of Merger with the Department and make all other filings or
recordings required by Maryland law in connection with the Merger.

6.4. Regulatory Filings.

(a) MGC undertakes that, if the Merger is consummated, it will file, or
cause its agents to file, an application pursuant to Section 8(f) of the 1940
Act for an order declaring that MGC has ceased to be a RIC.

(b) CLM will file the N-14 Registration Statement with the SEC and will
use its best efforts to ensure that the N-14 Registration Statement becomes
effective as promptly as practicable. MGC agrees to cooperate fully with CLM,
and will furnish to CLM the information relating to itself to be set forth in
the N-14 Registration Statement as required by the 1933 Act, the 1934 Act, the
1940 Act, and the rules and regulations thereunder and the state securities or
blue sky laws.

B-8

6.5. Preservation of Assets. CLM agrees that it has no plan or
intention to sell or otherwise dispose of the assets of MGC to be acquired in
the Merger, except for dispositions made in the ordinary course of business.

6.6. [Intentionally omitted.]

6.7. Shareholder List. Prior to the Effective Date, MGC shall have made
arrangements with its transfer agent to deliver to CLM, a list of the names and
addresses of all of the shareholders of record of MGC on the Effective Date and
the number of shares of common stock of MGC owned by each such shareholder,
certified by MGC's transfer agent or President to the best of their knowledge
and belief.

6.8. Delisting, Termination of Registration as an Investment Company.
MGC agrees that the (i) delisting of the shares of MGC from the NYSE and (ii)
termination of its registration as a RIC will be effected in accordance with
applicable law as soon as practicable following the Effective Date.

7. CONDITIONS PRECEDENT TO OBLIGATIONS OF CLM

The obligations of CLM hereunder shall be subject to the following
conditions:

7.1. Approval of Merger. This Agreement shall have been adopted by the
affirmative vote of the holders of a majority of the shares of common stock of
CLM issued and outstanding and entitled to vote thereon and the affirmative vote
of the holders of a majority of the shares of common stock of MGC issued and
outstanding and entitled to vote thereon; and MGC shall have delivered to CLM a
copy of the resolutions approving this Agreement adopted by its Board of
Directors and shareholders, certified by its secretary.

7.2. Certificates and Statements by MGC.

(a) MGC shall have furnished a statement of assets, liabilities and
capital, together with a schedule of investments with their respective dates of
acquisition and tax costs, certified on its behalf by its President (or any Vice
President) and its Treasurer, and a certificate executed by both such officers,
dated the Effective Date, certifying that there has been no material adverse
change in its financial position since the Agreement was entered into, other
than changes in its portfolio securities since that date or changes in the
market value of its portfolio securities.

(b) MGC shall have furnished to CLM a certificate signed by its
President (or any Vice President), dated the Effective Date, certifying that as
of the Effective Date, all representations and warranties made in this Agreement
are true and correct in all material respects as if made at and as of such date
and each has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied at or prior to such dates.

(c) MGC shall have delivered to CLM a letter from Tait, Weller & Baker,
dated the Effective Date, stating that such firm has performed a limited review
of the income Tax Returns for the period ended December 31, 2003, and that based
on such limited review, nothing came to their attention which caused them to
believe that such income Tax Returns did not properly reflect, in all material
respects, the income Taxes of MGC for the period covered thereby; and that for
the period from December 31, 2003 to and including the Effective Date and for
any taxable year ending upon the Effective Date, such firm has performed a
limited review to ascertain the amount of such applicable Taxes and has
determined that either such amount has been paid or reserves have been
established for payment of such Taxes, this review to be based on unaudited

B-9

financial data; and that based on such limited review, nothing has come to their
attention which caused them to believe that the Taxes paid or reserves set aside
for payment of such Taxes were not adequate in all material respects for the
satisfaction of such Taxes for the period from December 31, 2003, to and
including the Effective Date and for any taxable year ending upon the Effective
Date or that MGC would not continue to qualify as a RIC for federal income tax
purposes.

7.3. Absence of Litigation. There shall be no material litigation
pending with respect to the matters contemplated by this Agreement.

7.4. Legal Opinions.

(a) CLM shall have received an opinion from Blank Rome LLP, as counsel
to MGC, in form and substance reasonably satisfactory to CLM and dated the
Effective Date.

(b) CLM shall have received an opinion from Blank Rome LLP, as counsel
to CLM, dated the Effective Date, to the effect that for federal income tax
purposes the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code.

7.5. Auditor's Consent and Certification. CLM shall have received from
Tait, Weller & Baker a letter dated as of the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Effective Date, in form and substance satisfactory to CLM, to the effect that
(i) they are independent public auditors with respect to MGC within the meaning
of the 1933 Act and the applicable published rules and regulations thereunder;
and (ii) in their opinion, the financial statements and supplementary
information of MGC included or incorporated by reference in the N-14
Registration Statement and reported on by them comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and the
published rules and regulations thereunder.

7.6. Liabilities. The assets or liabilities of MGC to be transferred to
CLM shall not include any assets or liabilities which CLM, by reason of
limitations in its Registration Statement or Articles of Incorporation, may not
properly acquire or assume. CLM does not anticipate that there will be any such
assets or liabilities but CLM will notify MGC if any do exist and will reimburse
MGC for any reasonable transaction costs incurred by MGC for the liquidation of
such assets and liabilities.

7.8. Regulatory Filings.

(a) This Section has been intentionally left blank.

(b) This Section has been intentionally left blank.

7.10. Satisfaction of Progressive Return Fund, Inc. All proceedings
taken by MGC and its counsel in connection with the Merger and all documents
incidental thereto shall be satisfactory in form and substance to CLM.

7.11. Dividends. Prior to the Effective Date, MGC shall have declared
and paid a dividend or dividends which, together with all such previous

B-10

dividends, shall have the effect of distributing to its shareholders
substantially all of its net investment company taxable income that has accrued
through the Effective Date, if any (computed without regard to any deduction of
dividends paid), and substantially all of its net capital gain, if any, realized
through the Effective Date.

7.12. Custodian's Certificate. MGC's custodian shall have delivered to
CLM a certificate identifying all of the assets of MGC held or maintained by
such custodian as of the Valuation Time.

7.13. Books and Records. MGC's transfer agent shall have provided to
CLM (i) the originals or true copies of all of the records of MGC in the
possession of such transfer agent as of the Exchange Date, (ii) a certificate
setting forth the number of shares of MGC outstanding as of the Valuation Time,
and (iii) the name and address of each holder of record of any shares and the
number of shares held of record by each such shareholder.

8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MGC

The obligations of MGC hereunder shall be subject to the following
conditions:

8.1. Approval of Merger. This Agreement shall have been adopted, by the
affirmative vote of the holders of a majority of the shares of common stock of
MGC issued and outstanding and entitled to vote thereon and the affirmative vote
of the holders of a majority of the shares of common stock of CLM issued and
outstanding and entitled to vote thereon; and that CLM shall have delivered to
MGC a copy of the resolutions approving this Agreement adopted by its Board of
Directors and shareholders, certified by its secretary.

8.2. Certificates and Statements by CLM.

(b) CLM shall have furnished to MGC a certificate signed by its
President (or any Vice President), dated the Effective Date, certifying that as
of the Effective Date, all representations and warranties made in this Agreement
are true and correct in all material respects as if made at and as of such date
and each has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied at or prior to such dates.

(c) CLM shall have delivered to MGC a letter from Tait, Weller & Baker,
dated the Effective Date, stating that such firm has performed a limited review
of the income Tax Returns for the period ended December 31, 2003, and that based
on such limited review, nothing came to their attention which caused them to
believe that such income Tax Returns did not properly reflect, in all material
respects, the income Taxes of CLM for the period covered thereby; and that for
the period from December 31, 2003 to and including the Effective Date, such firm
has performed a limited review to ascertain the amount of such applicable Taxes,
and has determined that either such amount has been paid or reserves established
for payment of such Taxes, this review to be based on unaudited financial data;
and that based on such limited review, nothing has come to their attention which
caused them to believe that the Taxes paid or reserves set aside for payment of
such Taxes were not adequate in all material respects for the satisfaction of
Taxes for the period from December 31, 2003, to and including the Effective Date
or that CLM would not continue to qualify as a RIC for federal income tax
purposes.

8.3. Absence of Litigation. There shall be no material litigation
pending with respect to the matters contemplated by this Agreement.

B-11

8.4. Legal Opinions.

(a) MGC shall have received an opinion from Blank Rome LLP, as counsel
to CLM, in form and substance reasonably satisfactory to MGC and dated the
Effective Date.

(b) MGC shall have received an opinion from Blank Rome LLP dated the
Effective Date, to the effect that for federal income tax purposes the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code.

8.5. Auditor's Consent and Certification. MGC shall have received from
Tait, Weller & Baker a letter dated as of the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Effective Date, in form and substance satisfactory to MGC, to the effect that
(i) they are independent public auditors with respect to CLM within the meaning
of the 1933 Act and the applicable published rules and regulations thereunder;
and (ii) in their opinion, the financial statements and supplementary
information of CLM incorporated by reference in the N-14 Registration Statement
and reported on by them comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder.

8.7. Regulatory Filings.

(a) This Section has been intentionally left blank.

8.8. Satisfaction of MGC. All proceedings taken by CLM and its counsel
in connection with the Merger and all documents incidental thereto shall be
satisfactory in form and substance to MGC.

9. PAYMENT OF EXPENSES

9.1. Allocation. All expenses incurred in connection with the Merger
shall be allocated to the each Fund that incurred the expense. Such expenses
shall include, but not be limited to, all costs related to the preparation and
distribution of the N-14 Registration Statement, proxy solicitation expenses,
SEC registration fees, and NYSE listing fees. Neither of the Funds owe any
broker's or finder's fees in connection with the transactions provided for
herein.

B-12

10. COOPERATION FOLLOWING EFFECTIVE DATE

In case at any time after the Effective Date any further action is
necessary to carry out the purposes of this Agreement, each Funds will take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party may reasonably request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled to
indemnification as described below). MGC acknowledges and agrees that from and
after the Effective Date, CLM shall be entitled to possession of all documents,
books, records, agreements and financial data of any sort pertaining to MGC.

11. INDEMNIFICATION

11.1. MGC. CLM agrees to indemnify and hold harmless MGC and each of
MGC's directors and officers from and against any and all losses, claims,
damages, liabilities or expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of investigation) to which jointly
and severally, MGC or any of its directors or officers may become subject,
insofar as any such loss, claim, damage, liability or expense (or actions with
respect thereto) arises out of or is based on any breach by CLM of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.

11.2. CLM. MGC agrees to indemnify and hold harmless CLM and each of
CLM's directors and officers from and against any and all losses, claims,
liabilities or expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of investigation) to which jointly
and severally, CLM or any of its directors or officers may become subject,
insofar as any such loss, claim, damage, liability or expense (or actions with
respect thereto) arises out of or is based on any breach by MGC of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.

12. TERMINATION, POSTPONEMENT AND WAIVERS

12.1. Termination.

(a) Notwithstanding anything to the contrary in this Agreement, this
Agreement may be terminated and the Merger abandoned at any time (whether before
or after adoption by the shareholders of each Fund) prior to the Effective Date,
or the Effective Date may be postponed by: (i) mutual agreement of the Funds'
Board of Directors; (ii) the Board of Directors of CLM if any of the obligations
of MGC set forth in this Agreement has not been fulfilled or waived by such
Board or if MGC has made a material and intentional misrepresentation herein or
in connection herewith; or (iii) the Board of Directors of MGC if any of the
obligations of CLM set forth in this Agreement has not been fulfilled or waived
by such Board or if CLM has made a material and intentional misrepresentation
herein or in connection herewith.

(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the Agreement shall become void and have no further effect,
and there shall not be any liability hereunder on the part of either Fund or its
directors or officers, except for any such material breach or intentional
misrepresentation, as to each of which all remedies at law or in equity of the
party adversely affected shall survive.

12.2. Waiver. At any time prior to the Effective Date, any of the terms
or conditions of this Agreement may be waived by the Board of Directors of
either MGC or CLM (whichever is entitled to the benefit thereof), if, in the
judgment of such Board after consultation with its counsel, such action or
waiver will not have a material adverse effect on the benefits intended in this
Agreement to the shareholders of their respective fund, on behalf of which such
action is taken.

B-13

12.3. Expiration of Representations and Warranties.

(a) The respective representations and warranties contained in Articles
3 and 4 of this Agreement shall expire with, and be terminated by, the
consummation of the Merger, and neither Fund nor any of its officers, directors,
agents or shareholders shall have any liability with respect to such
representations or warranties after the Effective Date. This provision shall not
protect any Fund's officer, director, agent or shareholder against any liability
to the entity for which that officer, director, agent or shareholder so acts or
to its shareholders to which that officer, director, agent or shareholder would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties in the conduct of such office.

(b) If any order or orders of the SEC with respect to this Agreement
shall be issued prior to the Effective Date and shall impose any terms or
conditions which are determined by action of the Fund's Boards of Directors to
be acceptable, such terms and conditions shall be binding as if a part of this
Agreement without further vote or approval of the shareholders, unless such
terms and conditions shall result in a change in the method of computing the
number of shares of CLM common stock to be issued pursuant to this Agreement, in
which event, unless such terms and conditions shall have been included in the
proxy solicitation materials furnished to the shareholders prior to the meetings
at which the Merger shall have been approved, this Agreement shall not be
consummated and shall terminate unless the Funds call special meetings of
shareholders at which such conditions so imposed shall be submitted for
approval.

13. MISCELLANEOUS

and, further, that stop transfer instructions will be issued to CLM's transfer
agent with respect to such shares. MGC will provide CLM on the Effective Date
with the name of any MGC Shareholder who is to the knowledge of MGC an affiliate
of it on such date.

If to MGC:
William A. Clark, President
c/o Bear Stearns Funds Management Inc.
Investors First Fund, Inc.
383 Madison Avenue
New York, New York 10179

B-14

With copies to:
Thomas R. Westle, Esq.
Blank Rome LLP
405 Lexington Avenue, 24th Floor
New York, New York 10174

If to CLM:

Ralph Bradshaw, President
c/o Bear Stearns Funds Management Inc.
Progressive Return Fund, Inc.
383 Madison Avenue
New York, New York 10179

With copies to:
Thomas R. Westle, Esq.
Blank Rome LLP
405 Lexington Avenue, 24th Floor
New York, New York 10174

13.4. Amendments. This Agreement may be amended, modified or
supplemented in such manner as may be mutually agreed upon in writing by the
authorized officers of MGC and CLM; provided, however, that following the
meeting of MGC and CLM shareholders to approve the Merger, no such amendment may
have the effect of changing the provisions for determining the number of CLM
shares to be issued to MGC shareholders under this Agreement to the detriment of
such shareholders without their further approval.

13.5. Headings. The Article headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

13.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.

13.8. Successors and Assigns. This Agreement shall bind and inure to
the benefit of a Fund hereto and its successors and assigns, but no assignment
or transfer hereof or of any rights or obligations hereunder shall be made by
any party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and the Funds
shareholders and their respective successors and assigns, any rights or remedies
under or by reason of this Agreement.

B-15

13.9. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with the laws of the State of Maryland, without
regard to its principles of conflicts of law.

IN WITNESS WHEREOF, each Fund has caused this Agreement to be executed
by its President.

INVESTORS FIRST FUND, INC.

By:
--------------------------------------
Name: William A. Clark
Title: President

CORNERSTONE STRATEGIC VALUE FUND, INC.

By:
--------------------------------------
Name: Ralph W. Bradshaw
Title: President

B-16

EXHIBIT C1
FORM OF PROXY CARD

CORNERSTONE STRATEGIC VALUE FUND, INC.

The undersigned stockholder of Cornerstone Strategic Value
Fund, Inc. (the "Fund") hereby constitutes and appoints Messrs. Ralph W.
Bradshaw, Thomas R. Westle and Frank J. Maresca, or any of them, the action of a
majority of them voting to be controlling, 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 of the Fund to be held on Thursday, June 10, 2004 at 10:30 a.m.,
New York time, at the offices of Bear Stearns Funds Management Inc., 383 Madison
Avenue, 13th Floor, Conference Room 301, New York, New York 10179, 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 (1) the merger of Progressive Return Fund, Inc. with and into the
Fund; (2) the merger of Investors First Fund, Inc. with and into the Fund; (3)
the approval of the amendment to the Articles of Incorporation increasing the
amount of authorized shares; (4) the election of Messrs. Strauss and Wilcox, Sr.
as Class III Directors and Mr. Clark as a Class II Director; and (5) the
consideration and vote of such other matters as may properly come before the
Annual Meeting of Stockholders or any adjournment thereof.

IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS
1, 2, 3, AND 4. ANY AND ALL OTHER PROPOSALS WILL BE VOTED BY THE PROXYHOLDERS IN
THE BEST INTERESTS OF STOCKHOLDERS AS DETERMINED BY THE SOLE JUDGMENT OF THE
PROXYHOLDERS AT THE TIME OF THE MEETING.

--------------------------------------------------------------------------------

THIS PROXY IS SOLICITED ON BEHALF OF CORNERSTONE STRATEGIC VALUE FUND,
INC.'S BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON

June 10, 2004

(To be dated and signed on reverse side)

C1-1

Please mark boxes / / or /X/ in blue or black ink.

Please mark your votes as in this example:

--------
X
--------

--------------------------------------------------------------------------------
1. To approve the proposed merger of Progressive Return Fund, Inc. with and into
the Fund:

FOR AGAINST ABSTAIN

2. To approve the proposed merger of Investors First Fund, Inc. with and into
the Fund:

FOR AGAINST ABSTAIN

3. To approve the Amendment of the Articles of Incorporation increasing the
amount of authorized shares of common stock.

FOR AGAINST ABSTAIN

4. To approve the election of Messrs. Andy A. Strauss, Glenn W. Wilcox, Sr. as
Class III Directors and Mr. William A. Clark as a Class II Director of the Fund.

FOR WITHHOLD

FOR, except vote withheld from the following nominee(s):
-----------------------------------------------.

5. In their discretion, the proxies are authorized to vote upon such business as
may properly come before the meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE PROPOSALS.

C1-2

This proxy, when properly executed, will be voted in the manner directed herein
by the stockholder.

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 of Stockholders 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.

C1-3

EXHIBIT C-2

FORM OF PROXY CARD

PROGRESSIVE RETURN FUND, INC.

The undersigned stockholder of Progressive Return Fund, Inc.
(the "Fund") hereby constitutes and appoints Messrs. Ralph W. Bradshaw, Thomas
R. Westle and Frank J. Maresca, or any of them, the action of a majority of them
voting to be controlling, 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 of the
Fund to be held on Thursday, June 10, 2004 at 10:00 a.m., New York time, at the
offices of Bear Stearns Funds Management Inc., 383 Madison Avenue, 13th Floor,
Conference Room 301, New York, New York 10179, 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 (1) the merger of the Fund with and into Cornerstone Strategic Value
Fund, Inc.; (2) the election of Messrs. Lenagh and Strauss as Class I Directors
and Mr. Clark as a Class III Director; and (3) the consideration and vote of
such other matters as may properly come before the Annual Meeting of
Stockholders or any adjournment thereof.

IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS
1, 2 AND 3. ANY AND ALL OTHER PROPOSALS WILL BE VOTED BY THE PROXYHOLDERS IN THE
BEST INTERESTS OF STOCKHOLDERS AS DETERMINED BY THE SOLE JUDGMENT OF THE
PROXYHOLDERS AT THE TIME OF 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

June 10, 2004

(To be dated and signed on reverse side)

C2-1

Please mark boxes / / or /X/ in blue or black ink.

Please mark your votes as in this example:

-----
X
-----

--------------------------------------------------------------------------------
1. To approve the proposed merger of the Fund with and into the Cornerstone
Strategic Value Fund, Inc.:

FOR AGAINST ABSTAIN

2. To approve the election of Messrs. Thomas H. Lenagh and Andy A. Strauss as
Class I Directors and Mr. William A. Clark as a Class III Director.

FOR WITHHOLD

FOR, except vote withheld from the following nominee(s):

-----------------------------------------------.

3. In their discretion, the proxies are authorized to vote upon such business as
may properly come before the meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE PROPOSALS.

C2-2

This proxy, when properly executed, will be voted in the manner directed herein
by the stockholder.

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.

C2-3

EXHIBIT C-3

PROXY CARD

FORM OF PROXY CARD

INVESTORS FIRST FUND, INC.

The undersigned stockholder of Investors First Fund, Inc. (the
"Fund") hereby constitutes and appoints Messrs. Ralph W. Bradshaw, Thomas R.
Westle and Frank J. Maresca, or any of them, the action of a majority of them
voting to be controlling, 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 of the
Fund to be held on Thursday, June 10, 2004 at 9:30 a.m., New York time, at the
offices of Bear Stearns Funds Management Inc., 383 Madison Avenue, 13th Floor,
Conference Room 301, New York, New York 10179, 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 merger of the Fund with and into Cornerstone Strategic Value
Fund, Inc.; (b) the election of two Directors to serve until the 2007 Annual
Meeting of Stockholders; and (c) the consideration and vote of such other
matters as may properly come before the Annual Meeting of Stockholders or any
adjournment thereof.

--------------------------------------------------------------------------------

THIS PROXY IS SOLICITED ON BEHALF OF INVESTORS FIRST FUND, INC.'S
BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON

June 10, 2004

(To be dated and signed on reverse side)

C3-1

Please mark boxes / / or /X/ in blue or black ink.

Please mark your votes as in this example:

-----
X
-----

--------------------------------------------------------------------------------
1. To approve the proposed merger of the Fund with and into the Cornerstone
Strategic Value Fund, Inc.:

FOR AGAINST ABSTAIN

2. To approve the election of Messrs. Ralph W. Bradshaw and William A. Clark as
Directors of the Fund to serve until the 2007 Annual Meeting of Stockholders.

FOR WITHHOLD

FOR, except vote withheld from the following nominee(s):

-----------------------------------------------.

3. In their discretion, the proxies are authorized to vote upon such business as
may properly come before the meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE PROPOSALS.

C3-2

This proxy, when properly executed, will be voted in the manner directed herein
by the stockholder.

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.

C3-3

EXHIBIT D

ARTICLES OF AMENDMENT

CORNERSTONE STRATEGIC VALUE FUND, INC.

CORNERSTONE STRATEGIC VALUE FUND, INC. (hereinafter referred to as the
"Corporation"), a Maryland corporation, hereby certifies to the State Department
of Assessments and Taxation of Maryland that:

FIRST: Article FIFTH of the Charter is hereby amended in part to
read as follows:

The total number of shares of capital stock that the
Corporation shall have authority to issue is One Hundred
Million (100,000,000) shares of common stock (the "Common
Stock") par value of one tenth of one percent ($0.001) per
share, all of which shall be of a single class, such shares
having an aggregate par value of One Hundred Thousand
($1,000,000).

SECOND: The foregoing amendment to the Charter of the Corporation has
been approved by the Board of Directors of the Corporation.

IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on this ___th day of June, 2004.

CORNERSTONE STRATEGIC VALUE FUND, INC.

By: /s/ Ralph W. Bradshaw
--------------------------------
Name: Ralph W. Bradshaw
Title: President

WITNESS:

/s/ Thomas R. Westle
--------------------------------
Name: Thomas R. Westle
Title: Secretary

D-1

EXHIBIT E
CORNERSTONE STRATEGIC VALUE FUND, INC.

CORNERSTONE TOTAL RETURN FUND, INC.

PROGRESSIVE RETURN FUND, INC.

Audit Committee Charter

1. Audit Committee Membership.

The Audit Committee ("Audit Committee") of each of the Cornerstone
Strategic Value Fund, Inc., Cornerstone Total Return Fund, Inc. and the
Progressive Return Fund, Inc. (the "Funds") shall be composed entirely of
directors who are not "interested persons" (as such term is defined in the
Investment Company Act of 1940, as amended). Each member of an Audit Committee
shall have no relationship with the Funds, Cornerstone Advisors, Inc. (the
"Adviser"), or Bear Stearns Funds Management Inc. Membership of a Fund's Audit
Committee shall be determined by the respective Fund's full Board of Directors
from time to time at its sole discretion. If one or more members of the Audit
Committees qualify as an Audit Committee Financial expert (the "ACFE"), as
defined in Section 407 of the Sarbanes-Oxley Act of 2002, at least one such
member shall be designated as a Committees' ACFE. Such designation shall not
impose any greater responsibility or liability on that person than the
responsibility and liability imposed on such person as a member of the Audit
Committee.

2. Meetings.

Each Audit Committee shall meet at least once a year and is empowered
to hold special meetings as circumstances require.

3. Purposes.

The purposes of an Audit Committee is to:

1. Assist each Board in its oversight of the Fund's accounting and financial
reporting policies and practices, its internal controls over financial
reporting and, as appropriate, the internal controls over financial
reporting of certain service providers.

2. Assist each Board in its oversight of the quality and objectivity of the
Fund's financial statements and the independent audit thereof.

3. Select, oversee and set compensation of each Fund's independent auditors
(the "Auditor") and to act as a liaison between the Auditors and the full
Board of Directors.

The function of an Audit Committee is oversight; it is each Fund's
management's responsibility to maintain appropriate systems for accounting and
internal control over financial reporting, and the Auditors responsibility to
plan and carry out the audit in accordance with auditing standards generally
accepted in the United States. The Auditors are ultimately responsible to the
Boards of Directors and the Audit Committees, as representatives of the
shareholders.

4. Duties and Powers.

To carry out their purposes, each Audit Committee shall have the
following duties and powers and shall apply the following principles:

E-1

(a) Selection of Auditors.

(i) The Audit Committee shall pre-approve the selection of the Auditors
and shall recommend the selection, retention or termination of
Auditors to the Boards and, in connection therewith, to evaluate the
independence of the Auditors, including whether the Auditors provide
any consulting, auditing or non-audit services to the Adviser or its
affiliates. The Audit Committee shall review the Auditors' specific
representations as to its independence;

(ii) The Audit Committee shall review and approve the fees charged by the
Auditors for audit and non-audit services in accordance with the
pre-approval requirements set forth in (d) below. Each Fund shall
provide for appropriate funding, as determined by its Audit Committee,
to compensate the Auditors for any authorized service provided to the
Fund.

(b) Meetings with the Auditors.

The Audit Committee shall meet with the Auditors, including private
meetings, as necessary to:

(i) review the arrangements for and scope of the annual audit and any
special audits;
(ii) provide the Auditors the opportunity to report to the Audit
Committee, on a timely basis all critical accounting policies and
practices to be used;
(iii) discuss any matters of concern relating to a Fund's financial
statements, including: (A) any adjustments to such statements
recommended by the Auditors, or other results of said audit(s);
and (B) all alternative treatments of financial information within
generally accepted accounting principles that have been discussed
with management, the ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
Auditors;

(iv) provide the Auditors the opportunity to report to the Audit
Committee, on a timely basis, any material written communication between the
Auditors and management such as any management letter or schedule of unadjusted
differences;

(v) provide the Auditors the opportunity to report all non-audit
services provided to any entity in the "investment company complex"1 that were
not pre-approved by the Audit Committees;

(vi) consider the Auditors' comments with respect to a Fund's financial
policies, procedures and internal accounting controls and responses thereto by
the Fund's officers in accordance with Statement of Auditing Standards No. 61,
as amended;

(vii) review the form of written opinion the Auditors propose to render
to each Board of Directors and shareholders; and

(viii) provide the Auditors the opportunity to report on any other matter
that the Auditors deem necessary or appropriate to discuss with the Audit
Committee.

The Audit Committee shall consider the effect upon its respective Fund
of any changes in accounting principles or practices proposed by the
Auditors or the Fund's officers.

--------------------
1 "INVESTMENT COMPANY COMPLEX" MEANS THE FUNDS, THE ADVISER AND ANY ENTITY
CONTROLLED BY, CONTROLLING OR UNDER COMMON CONTROL WITH THE ADVISER IF SUCH
ENTITY IS AN INVESTMENT ADVISER OR IS ENGAGED IN THE BUSINESS OF PROVIDING
ADMINISTRATIVE, CUSTODIAN, UNDERWRITING OR TRANSFER AGENT SERVICES TO THE
FUND OR ADVISER.

E-2

(d) Pre-Approval Requirements.

(i) Pre-Approval Requirements. Before the Auditors are engaged by a Fund
to render audit or non-audit services, either:

(A) The Audit Committee shall pre-approve all auditing services
and permissible non-audit services (e.g., tax services)
provided to the Fund. The Audit Committees may delegate to
one or more of its members the authority to grant
pre-approvals. The decision of any member to whom authority
is delegated under this section shall be presented to the
full Audit Committee at each of its scheduled meetings; or

(B) The engagement to render the auditing service or permissible
non-audit service is entered into pursuant to pre-approval
policies and procedures established by the Audit Committee.
Any such policies and procedures must (1) be detailed as to
the particular service and (2) not involve any delegation of
the Audit Committee's responsibilities to the Adviser. The
Audit Committee must be informed of each service entered into
pursuant to the policies and procedures. A copy of any such
policies and procedures shall be attached as an exhibit to
this Audit Committee Charter;

(ii) De Minimis Exceptions to Pre-Approval Requirements. Pre-Approval for
a service provided to a Fund other than audit, review or attest
services is not required if: (1) the aggregate amount of all such
non-audit services provided to a Fund constitutes not more than 5
percent of the total amount of revenues paid by the Fund to the
Auditor during the fiscal year in which the non-audit services are
provided; (2) such services were not recognized by the Fund at the
time of the engagement to be non-audit services; and (3) such
services are promptly brought to the attention of the Audit
Committee and are approved by the Audit Committee or by one or more
members of the Audit Committee to whom authority to grant such
approvals has been delegated by the Audit Committee prior to the
completion of the audit;

(iii) Pre-Approval of Non-Audit Services Provided to the Adviser and
Certain Control Persons. The Audit Committee shall pre-approve any
non-audit services proposed to be provided by the Auditors to (a)
the Adviser and (b) any entity controlling, controlled by, or under
common control with the Adviser that provides ongoing services to
the Funds, if the Auditors' engagement with the Adviser or any such
control persons relates directly to the operations and financial
reporting of the Funds.

Application of De Minimis Exception. The De Minimis
exception set forth above under Section 5(d)(ii) applies to
pre-approvals under this Section (iii) as well, except that
the "total amount of revenues" calculation is based on the
total amount of revenues paid to the Auditor by each Fund and
any other entity that has its services approved under this
Section (i.e., the Adviser or any control person).

(iv) The pre-approval requirements set forth above are optional to the
extent that any engagement is entered into with the Auditor prior to
May 6, 2003 (the effective date of the Securities and Exchange
Commission ("SEC") regulations establishing such requirements).2
Engagements entered into prior to May 6, 2003, are subject to any
limitations set forth in the transition and grandfathering
provisions in the SEC rules.

--------------------
2 THE FINAL RULES ADOPTED BY THE SECURITIES AND EXCHANGE COMMISSION RELATING TO
PRE-APPROVAL REQUIREMENTS ARE SET FORTH IN STRENGTHENING THE COMMISSION'S
REQUIREMENTS REGARDING AUDITOR INDEPENDENCE, RELEASE NO. IC-25915 (JAN. 28,
2003).

E-3

(e) Prohibited Activities of the Auditor. An auditor who is performing the
audit for a Fund may not perform contemporaneously (during the audit
and professional engagement period) the following non-audit services
for the Fund:

(i) bookkeeping or other services related to the accounting records or
financial statements of the Fund;

(ii) financial information systems design and implementation;

(iii) appraisal or valuation services, fairness opinions, or
contribution-in-kind reports;

(iv) actuarial services;

(v) internal audit outsourcing services;

(vi) management functions or human resources;

(vii) broker or dealer, investment adviser, or investment banking
services;

(viii) legal services and expert services unrelated to the audit; and

(ix) any other service that the Public Company Accounting Oversight Board
determines, by regulation, is impermissible.

The Auditors will be responsible for informing the Audit Committees of
whether it believes that a particular non-audit service is permissible or
prohibited pursuant to applicable regulations and standards.

(f) Improprieties. Investigate improprieties or suspected improprieties in
a Fund's operations.

(g) Board Reports. Report its activities to the full Board on a regular
basis and to make such recommendations with respect to the above and
other matters, as the Audit Committee may deem necessary or
appropriate.

5. Meetings with Treasurer/Advisory Personnel.

The Audit Committee, in its discretion, may meet with the Treasurer of
each Fund and with personnel of the Adviser.

6. Authority to Retain Counsel.

The Audit Committee shall have the resources and authority appropriate
to discharge their responsibilities, including the authority to retain
special counsel and other experts or consultants at the expense of its
respective Fund.

7. Annual Charter Review.

Each Audit Committee shall review this Charter at least annually and
recommend any changes to its full Board of Directors.

8. Qualified Legal Compliance Committee

Each Audit Committee shall act as the respective Fund's Qualified Legal
Compliance Committee ("QLCC") for the purpose of being presented with and
investigating any evidence of a material violation of securities laws by a Fund,
a breach of a fiduciary duty or a similar violation. Each QLCC will be
responsible for adopting written procedures for the confidential receipt,
retention, and consideration of any report of evidence of a material violation.

E-4

See Exhibit A.

As the QLCC, the Committee shall have all powers that such a committee is
required to have under the U.S. Securities and Exchange Commissions rules, as
well as the powers granted to it under this Charter. Except to the extent that
the Committee adopts specific procedures for its functions as the QLCC, its
procedures as the Audit Committee shall be applicable to its actions as the
QLCC.

Each QLCC shall be responsible for the following:

(a) to inform a Fund's chief executive officer of any report of evidence of a
material violation, if the QLCC, in its sole discretion, deems necessary;

(b) to determine whether an investigation is necessary regarding any report of
evidence of a material violation by the Fund, its officers, directors,
Investment Adviser, employees or agents and, if it determines an investigation
is necessary or appropriate, to:

(i) Notify the full Board of Directors;

(ii) Initiate an investigation, which may be conducted either by the
Fund Counsel or by outside attorneys; and

(iii) Retain such additional expert personnel as the QLCC deems
necessary; and

(i) Recommend, by majority vote, that the Fund implement an appropriate
response to evidence of a material violation; and

(ii) Inform Fund Counsel, the Chief Executive Officer and the Board of
Directors of the results of any such investigation under this
section and the appropriate remedial measures to be adopted.

Dated: August 30, 2003

E-5

EXHIBIT F

PGF AUDIT COMMITTEE CHARTER

Please See Exhibit E

E-6

EXHIBIT G
INVESTORS FIRST FUND, INC.

Audit Committee Charter

Audit Committee Membership: The Audit Committee ("Audit Committee") of Investors
First Fund, Inc. (the "Fund") shall be composed entirely of directors who are
not "interested persons" (as such term is defined in the Investment Company Act
of 1940, as amended). Each member of the Audit Committee shall have no
relationship with the Fund, Deutsche Asset Management Inc. (the "Adviser"), or
Bear Stearns Funds Management Inc. (the "Administrator"). Membership of the
Fund's Audit Committee shall be determined by the Board of Directors, from time
to time, at its sole discretion. If one or more members of the Audit Committee
qualifies as an Audit Committee Financial expert (the "ACFE"), as defined in
Section 407 of the Sarbanes-Oxley Act of 2002, at least one such member shall be
designated as the Committee's ACFE. Such designation shall not impose any
greater responsibility or liability on that person than the responsibility and
liability imposed on such person as a member of the Audit Committee.

Meetings: The Audit Committee shall meet at least once a year and is
empowered to hold special meetings as circumstances require.

Purpose: The purposes of the Audit Committee is to:

1. Assist the Board in its oversight of the Fund's accounting and
financial reporting policies and practices, its internal controls
over financial reporting and, as appropriate, the internal controls
over financial reporting of certain service providers.

2. Assist the Board in its oversight of the quality and objectivity of
the Fund's financial statements and the independent audit thereof.

3. Select, oversee and set compensation of the Fund's independent
auditor (the "Auditor") and to act as a liaison between the Auditor
and the full Board of Directors.

The function of the Audit Committee is oversight; it is the Fund's
management's responsibility to maintain appropriate systems for accounting and
internal control over financial reporting, and the Auditor's responsibility to
plan and carry out the audit in accordance with auditing standards generally
accepted in the United States. The Auditor is ultimately responsible to the
Board of Directors and the Audit Committee, as representatives of the
shareholders.

Duties and Powers: To carry out its purposes, the Audit Committee shall have the
following duties and powers and shall apply the following principles:

A. Selection of Auditor.

(i) The Audit Committee shall pre-approve the selection of the Auditor and shall
recommend the selection, retention or termination of Auditor to the Board and,
in connection therewith, to evaluate the independence of the Auditor, including
whether the Auditor provides any consulting, auditing or non-audit services to
the Adviser or its affiliates. The Audit Committee shall review the Auditor's
specific representations as to its independence;

(ii) The Audit Committee shall review and approve the fees charged by the
Auditor for audit and non-audit services in accordance with the pre-approval
requirements set forth in (d) below. The Fund shall provide for appropriate
funding, as determined by its Audit Committee, to compensate the Auditor for any
authorized service provided to the Fund.

G-1

B. Meetings with the Auditors.

The Audit Committee shall meet with the Auditor, including private meetings, as
necessary to:

(i) review the arrangements for and scope of the annual audit and any special
audits;

(ii) provide the Auditor the opportunity to report to the Audit Committee, on a
timely basis all critical accounting policies and practices to be used; (iii)
discuss any matters of concern relating to the Fund's financial statements,
including:

(A) any adjustments to such statements recommended by the Auditor, or
other results of said audit; and

(B) all alternative treatments of financial information within
generally accepted accounting principles that have been discussed
with management, the ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
Auditor;

(iv) provide the Auditor the opportunity to report to the Audit Committee, on a
timely basis, any material written communication between the Auditor and
management such as any management letter or schedule of unadjusted differences;
(v) provide the Auditor the opportunity to report all non-audit services
provided to any entity in the "investment company complex"3 that were not
pre-approved by the Audit Committee;
(vi) consider the Auditor's comments with respect to the Fund's financial
policies, procedures and internal accounting controls and responses thereto by
the Fund's officers in accordance with Statement of Auditing Standards No. 61,
as amended;
(vii) review the form of written opinion the Auditor proposes to render to the
Board of Directors and shareholders; and
(viii) provide the Auditor the opportunity to report on any other matter that
the Auditor deems necessary or appropriate to discuss with the Audit Committee.

C. Change in Accounting Principles.

The Audit Committee shall consider the effect upon the Fund of any
changes in accounting principles or practices proposed by the Auditor
or the Fund's officers.

D. Pre-Approval Requirements.

Pre-Approval Requirements. Before the Auditor is engaged by the Fund to
render audit or non-audit services, either:

1. The Audit Committee shall pre-approve all auditing services
and permissible non-audit services (e.g., tax services)
provided to the Fund. The Audit Committee may delegate to one
or more of its members the authority to grant pre-approvals.
The decision of any member to whom authority is delegated
under this section shall be presented to the full Audit
Committee at its scheduled meeting; or
2. The engagement to render the auditing service or permissible
non-audit service is entered into pursuant to pre-approval
policies and procedures established by the Audit Committee.
Any such policies and procedures must (1) be detailed as to
the particular service and (2) not involve any delegation of
the Audit Committee's responsibilities to the Adviser. The
Audit Committee must be informed of each service entered into
pursuant to the policies and procedures. A copy of any such
policies and procedures shall be attached as an exhibit to
this Audit Committee Charter;

-----------------------------
3 "INVESTMENT COMPANY COMPLEX" MEANS THE FUNDS, THE ADVISER AND ANY ENTITY
CONTROLLED BY, CONTROLLING OR UNDER COMMON CONTROL WITH THE ADVISER IF SUCH
ENTITY IS AN INVESTMENT ADVISER OR IS ENGAGED IN THE BUSINESS OF PROVIDING
ADMINISTRATIVE, CUSTODIAN, UNDERWRITING OR TRANSFER AGENT SERVICES TO THE
FUND OR ADVISER.

G-2

3. De Minimis Exceptions to Pre-Approval Requirements.
Pre-Approval for a service provided to a Fund other than
audit, review or attest services is not required if: (1) the
aggregate amount of all such non-audit services provided to
the Fund constitutes not more than 5 percent of the total
amount of revenues paid by the Fund to the Auditor during the
fiscal year in which the non-audit services are provided; (2)
such services were not recognized by the Fund at the time of
the engagement to be non-audit services; and (3) such services
are promptly brought to the attention of the Audit Committee
and are approved by the Audit Committee or by one or more
members of the Audit Committee to whom authority to grant such
approvals has been delegated by the Audit Committee prior to
the completion of the audit;
4. Pre-Approval of Non-Audit Services Provided to the Adviser and
Certain Control Persons. The Audit Committee shall pre-approve
any non-audit services proposed to be provided by the Auditor
to (a) the Adviser and (b) any entity controlling, controlled
by, or under common control with the Adviser that provides
ongoing services to the Fund, if the Auditor's engagement with
the Adviser or any such control persons relates directly to
the operations and financial reporting of the Fund.

Application of De Minimis Exception. The De Minimis
exception set forth above under Section 5(d)(ii) applies to
pre-approvals under this Section (iii) as well, except that
the "total amount of revenues" calculation is based on the
total amount of revenues paid to the Auditor by the Fund and
any other entity that has its services approved under this
Section (i.e., the Adviser or any control person).

(h) Prohibited Activities of the Auditor. An auditor who is performing the
audit for the Fund may not perform contemporaneously (during the audit
and professional engagement period) the following non-audit services
for the Fund:

(x) bookkeeping or other services related to the accounting records or
financial statements of the Fund;

(xi) financial information systems design and implementation;

(xii) appraisal or valuation services, fairness opinions, or
contribution-in-kind reports;

(xiii) actuarial services;

(xiv) internal audit outsourcing services;

(xv) management functions or human resources;

(xvi) broker or dealer, investment adviser, or investment banking services;

(xvii) legal services and expert services unrelated to the audit; and

(xviii) any other service that the Public Company Accounting Oversight Board
determines, by regulation, is impermissible.

The Auditor will be responsible for informing the Audit Committee of
whether it believes that a particular non-audit service is permissible
or prohibited pursuant to applicable regulations and standards.

(i) Improprieties. Investigate improprieties or suspected improprieties in
the Fund's operations.

G-3

(j) Board Reports. Report its activities to the full Board on a regular
basis and to make such recommendations with respect to the above and
other matters, as the Audit Committee may deem necessary or
appropriate.

9. Meetings with Treasurer/Advisory Personnel.

The Audit Committee, in its discretion, may meet with the Treasurer of
the Fund and with personnel of the Adviser.

10. Authority to Retain Counsel.

11. Annual Charter Review.

The Audit Committee shall review this Charter at least annually and
recommend any changes to the Board of Directors.

Dated: November 20, 2003

G-4

CORNERSTONE STRATEGIC VALUE FUND, INC.
383 Madison Avenue
New York, New York 10179

PART B

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information ("SAI"), relates specifically to the
shares of Cornerstone Strategic Value Fund, Inc. ("CLM") to be issued pursuant
to (i) an Agreement and Plan of Merger, dated May 28, 2004, whereby Progressive
Return Fund, Inc, will merge with and into CLM, and (ii) an Agreement and Plan
of Merger, dated May 28, 2004, whereby Investors First Fund, Inc. will merge
with and into CLM. This SAI does not constitute a prospectus. This SAI does not
contain all the information that a stockholder should consider before voting on
the proposal contained in the Proxy Statement/Prospectus that relates to their
fund, and, therefore, should be read in conjunction with the related Proxy
Statement/Prospectus, dated April __, 2004. A copy of the Proxy
Statement/Prospectus may be obtained without charge by calling (212) 272-2093.
Please retain this document for future reference.

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED APRIL __, 2004

The SEC has not approved or disapproved these securities or determined if this
Proxy Statement/Prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.

TABLE OF CONTENTS

DESCRIPTION OF THE FUND...................................................... 1

INVESTMENT POLICIES, RISKS AND RESTRICTIONS.................................. 2

MANAGEMENT................................................................... 4

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS................................... 6

INVESTMENT MANAGEMENT AND OTHER SERVICES..................................... 6

PORTFOLIO TRANSACTIONS....................................................... 6

TAXATION..................................................................... 7

FINANCIAL STATEMENTS......................................................... 9

THE INFORMATION IN THIS SAI IS NOT COMPLETE AND MAY BE CHANGED. CLM MAY NOT SELL
THESE SECURITIES UNTIL THE PROXY STATEMENT/PROSPECTUS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS DECLARED EFFECTIVE. THIS SAI IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

INTRODUCTION

This SAI is intended to supplement the information provided in the
Proxy Statement/Prospectus dated April __, 2004 (the "Proxy
Statement/Prospectus"). The Proxy Statement/Prospectus has been sent to the
stockholders of (1) CLM in connection with the solicitation of proxies by the
Board of Directors to be voted at the CLM Annual Meeting of Stockholders, (2)
PGF in connection with the solicitation of proxies by the Board of Directors to
be voted at the PGF Annual Meeting, and (3) MGC in connection with the
solicitation of proxies by the Board of Directors to be voted at the MGC Annual
Meeting of Stockholders all to be held on May 20, 2004. This SAI incorporates by
reference the Prospectus of PGF dated as November 9, 1989, and the Fund's Annual
Report to Stockholders for the fiscal year ended December 31, 2003. In addition,
this SAI incorporates by reference the Prospectus of MGC dated as May 7, 1987,
and the Fund's Annual Report to Stockholders for the fiscal year ended December
31, 2003.

DESCRIPTION OF THE FUND

Cornerstone Strategic Value Fund, Inc. (the "Fund" or "CLM") was
incorporated in Maryland on May 1, 1987, under its previous name "Clemente
Global Growth Fund, Inc." and commenced investment operations on June 30, 1987.
On April 20, 2001, the stockholders of the Fund approved a name change whereby
the Fund's official name became "Cornerstone Strategic Value Fund, Inc." The
Fund is registered under the Investment Company of 1940, as amended (the
"Investment Company Act"), as a closed-end, diversified management investment
company and is listed on the American Stock Stock Exchange, LLC ("AMEX") under
the symbol "CLM." CLM seeks long term capital appreciation through investing
primarily in equity securities of U.S. and Foreign companies which Fund
Management believes have demonstrated fundamental investment value and favorable
growth prospects, as determined by Fund Management.

The authorized capitalization of CLM consists of 25,000,000 shares of
common stock having $0.01 par value per share (the "Shares"). Shares of the Fund
have equal voting rights and liquidation rights. When matters are submitted to
stockholders for a vote, each stockholder is entitled to one vote for each full
Share owned and fractional votes for fractional Shares owned. The Fund holds its
annual meeting of stockholders within 120 days after the end of its fiscal year
which ends on December 31.

Each Share of CLM represents an equal proportionate interest in the
assets and liabilities belonging to CLM with each other share of CLM and is
entitled to such dividends and distributions out of the income belonging to CLM
as are declared by the Board of Directors (the "Directors"). The Shares do not
have cumulative voting rights or any preemptive or conversion rights. In the
event of the dissolution or liquidation of the Fund, the holders of shares of
the Fund are entitled to share pro rata in the net assets of the Fund available
for distribution to shareholders.

B-1

INVESTMENT POLICIES, RISKS AND RESTRICTIONS

The Proxy Statement/Prospectus presents the investment objective and
the principal investment strategies and risks of the Fund. The investment
objective of the Fund is to seek long term capital appreciation by investing
primarily in U.S. and non-U.S. companies. There can be no assurance that the
Fund will achieve its investment objective. This section supplements the
disclosure in the Fund's Proxy Statement/Prospectus and provides additional
information on the Fund's investment policies and restrictions.

NON-PRINCIPAL INVESTMENT POLICIES

TEMPORARY DEFENSIVE POSITIONS. The Fund may, from time to time, take
temporary defensive positions that are inconsistent with its principal
investment strategies in attempting to respond to adverse market, economic,
political or other conditions. Such investments include various short-term
instruments. If the Fund takes a temporary defensive position at the wrong time,
the position would have an adverse impact on the Fund's performance and it may
not achieve its investment objective. The Fund reserves the right to invest all
of its assets in temporary defensive positions.

SECURITIES LENDING. The Fund may lend its portfolio securities to
broker-dealers in amounts equal to no more than 33 1/3% of the Fund's net
assets. These transactions will be fully collateralized at all times with cash
and/or high quality, short-term debt obligations. These transactions involve
risk to the Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the securities lent. In the event
the original borrower defaults on its obligation to return lent securities, the
Fund will seek to sell the collateral, which could involve costs or delays. To
the extent proceeds from the sale of collateral are less than the repurchase
price, the Fund would suffer a loss and you could lose money on your investment.

BORROWING. The Fund may borrow money from banks, including pursuant to
a revolving line of credit established for the benefit of investment companies
managed by Cornerstone Advisors, for temporary or emergency purposes in order to
meet redemption requests. To reduce its indebtedness, the Fund may have to sell
a portion of its investments at a time when it may be disadvantageous to do so.
In addition, interest paid by the Fund on borrowed funds would decrease the net
earnings of the Fund

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
collateralized by the securities in which it may invest. A repurchase agreement
involves the purchase by the Fund of securities with the condition that the
original seller (a bank or broker-dealer) will buy back the same securities
("collateral") at a predetermined price or yield. Repurchase agreements involve
certain risks not associated with direct investments in securities. In the event
the original seller defaults on its obligation to repurchase, the Fund will seek
to sell the collateral, which could involve costs or delays. To the extent
proceeds from the sale of collateral are less than the repurchase price, the
Fund would suffer a loss.

B-2

PRINCIPAL INVESTMENT RISKS

Please see the Fund's Proxy Statement/Prospectus for additional
information concerning the Principal Investment Risks of the Fund.

INVESTMENT RESTRICTIONS

The Fund has adopted certain fundamental investment restrictions that
may not be changed without the prior approval of the holders of a majority of
the Fund's outstanding voting securities. For purposes of the restrictions
listed below, all percentage limitations, with the exception of the percentage
limitation listed in 2 below, apply immediately after a purchase or initial
investment, and any subsequent change in any applicable percentage resulting
from market fluctuations does not require elimination of any security from the
Fund's portfolio. Fund policies which are not fundamental may be modified by the
Board of Directors if, in the reasonable exercise of the Board's business
judgment, modification is determined to be necessary or appropriate to carry out
the Fund's objective. Under its fundamental restrictions, the Fund may not:

1. Invest 25% or more of the total value of its assets in a particular
industry. This restriction does not apply to investments in United States
Government securities.

2. Issue senior securities, borrow or pledge its assets, except that
the Fund may borrow from a bank for temporary or emergency purposes or for the
clearance of transactions in amounts not exceeding 10% (taken at the lower of
cost or current value) of its total assets (not including the amount borrowed)
and may also pledge its assets to secure such borrowings. Additional investments
will not be made when borrowings exceed 5% of the Fund's assets.

3. Make short sales of securities or maintain a short position in any
security.

4. Purchase securities on margin, except such short-term credits as may
be necessary or routine for the clearance or settlement of transactions and the
maintenance of margin with respect to forward contracts or other hedging
transactions.

5. Underwrite securities of other issuers, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933, as amended, in
selling portfolio securities.

6. Purchase or sell commodities or real estate, except that the Fund
may invest in securities secured by real estate or interests in real estate or
in securities issued by companies, including real estate investment trusts, that
invest in real estate or interests in real estate, and may purchase and sell
forward contracts on foreign currencies to the extent permitted under applicable
law.

7. Make investments for the purpose of exercising control over, or
management of, the issuers of any securities.

B-3

MANAGEMENT OF THE FUND

The business and affairs of the Fund are managed under the direction of
the Fund's Board of Directors, and the day-to-day operations are conducted
through or under the direction of the officers of the Fund.

For information concerning CLM's Directors and Officers, please refer
to CLM's Proxy Statement/Prospectus dated April __, 2004.

The Fund has an Audit Committee and a Nominating Committee each of
which is comprised of all of the non-interested members of the Board of
Directors. For additional information concerning the Audit Committee and the
Nominating Committee, please refer to CLM's Proxy Statement/Prospectus dated
April __, 2004

INVESTMENT ADVISORY AGREEMENT

The Fund's Board of Directors, including the Directors who are not
interested persons of any party to the Cornerstone Agreement or its affiliates,
recently determined to continue the investment advisory agreement with
Cornerstone Advisors on February 20, 2004, with its legal counsel in attendance.

In approving the Cornerstone Agreement and determining to submit it to
the stockholders of the Fund for their approval, the Non-Interested members of
the Board of Directors considered many factors, including the nature, quality
and scope of the operations and services to be provided in comparison to other
comparable investment managers, the experience of Cornerstone Advisors, and the
prior experience of Messrs. Bradshaw and Bentz. The Non-Interested members of
the Board of Directors noted that Cornerstone Advisors, Inc. (i) has experience
in providing investment advisory services to closed-end funds, (ii) has
continued to take steps in an effort to reduce the discount at which the Fund's
shares have historically traded at, and (iii) has continued to strive to reduce
CLM's expenses. Furthermore, the Non-Interested members of the Board of
Directors considered the opportunity to obtain comparable services at comparable
costs. 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.

CODE OF ETHICS

PRINCIPAL OFFICERS CODE OF ETHICS

For additional information concerning the Code of Ethics which applies
to the Fund's principal officers, please refer to CLM's Proxy
Statement/Prospectus dated April __, 2004.

B-4

RULE 17J-1 OF THE 1940 ACT

The Fund and Cornerstone Advisors have adopted a written Code of Ethics
that are compliant with Rule 17j-1 of the Investment Company Act, which permit
personnel covered by the Code of Ethics ("Covered Persons") to invest in
securities, including securities that may be purchased or held by the Fund. The
Code of Ethics also contains provisions designed to address the conflicts of
interest that could arise from personal trading by advisory personnel. The
following are some of the requirements under the Fund's and Cornerstone
Advisors' Code of Ethics: (1) all Covered Persons must report their personal
securities transactions at the end of each quarter; (2) with certain limited
exceptions, all Covered Persons must obtain preclearance before executing any
personal securities transactions; (3) Covered Persons may not execute personal
trades in a security if there are any pending orders in that security by the
respective Fund; and (4) Covered Persons may not invest in initial public
offerings.

The Board of Directors of the Fund reviews the administration of the
Code of Ethics at least annually and may impose sanctions for violations of the
Code of Ethics. The Codes of Ethics for the Fund and Cornerstone Advisers can be
reviewed and copied either on the EDGAR database on the SEC's website at
http://www.sec.gov or at the Securities Exchange Commission's Public reference
room in Washington, D.C. Information on the operation of the Public Reference
Room may by obtained by calling the SEC at (202) 942-8090.

PROXY VOTING POLICIES AND PROCEDURES

The Fund provides a voice on behalf of shareholders of the Fund. The
Fund views the proxy voting process as an integral part of the relationship with
the Fund. CLM has entered into an arrangement with Institutional Shareholders
Services ("ISS") whereby ISS votes all of the Fund's portfolio companies proxy
statements and records all of the proxy votes for compilation in the Form N-PX.
The Fund believes that ISS is in a better position to monitor corporate actions,
analyze proxy proposals, make voting decisions and ensure that proxies are
submitted promptly. Therefore, the Fund delegates its authority to vote proxies
to ISS, subject to the supervision of the Board of Trustees. The fundamental
purpose of ISS's Domestic Corporate Governance Policy is to ensure that each
vote will be in a manner that reflects the best interest of the Fund and its
shareholders, and that maximizes the value of the Fund's investment.

MORE INFORMATION

The actual voting records relating to portfolio securities during the
most recent 12 month period ended June 30 (starting with the year ending June
30, 2004) will be available without charge, upon request by calling toll-free,
1-866-227-3400 or by accessing the SEC's website at WWW.SEC.GOV. In addition, a
copy of the Fund's proxy voting policies and procedures are also available by
calling 1-866-227-3400 and will be sent within three business days of receipt of
a request.

B-5

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS

Please refer to CLM's Proxy Statement/Prospectus dated April __, 2004
for information on this Item.

INVESTMENT MANAGEMENT AND OTHER SERVICES

INVESTMENT ADVISER.

Please refer to CLM's Proxy Statement/Prospectus dated April __, 2004,
for additional information concerning CLM's investment adviser.

ADMINISTRATOR.

Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's
administrator pursuant to an administrative agreement with each Fund. BSFM is
located at 383 Madison Avenue, 23rd Floor, New York, New York 10179.

CUSTODIAN.

Custodial Trust Company, 101 Carnegie Center, Princeton, New Jersey, is
the custodian for the Fund's assets.

TRANSFER AGENT AND REGISTRAR.

American Stock Transfer & Trust Co., 59 Maiden Lane, New York, New York
10038 acts as the transfer agent and registrar of the Fund.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities for the Fund are made by
Cornerstone Advisors subject to the overall review of the Fund's Board of
Directors. Portfolio securities transactions for the Fund are placed on behalf
of the Fund by persons authorized by Cornerstone Advisors. Cornerstone Advisors
manages other investment companies and accounts that invest in securities.
Although investment decisions for the Fund is made independently from those of
the other accounts, investments of the type the Fund may make may also be made
on behalf of those other accounts. When the Fund and one or more of those other
accounts is prepared to invest in, or desires to dispose of, the same security,
available investments or opportunities for each will be allocated in a manner
believed by Cornerstone Advisors to be equitable. In some cases, this procedure
may adversely affect the price paid or received by the Fund or the size of the
position obtained or disposed of by the Fund.

Transactions on U.S. and some foreign stock exchanges involve the
payment of negotiated brokerage commissions, which may vary among different
brokers. The cost of securities purchased from underwriters includes an
underwriter's commission or concession, and the prices at which securities are
purchased from and sold to dealers in the over-the-counter markets include an

B-6

undisclosed dealer's mark-up or mark-down. Fixed income securities are generally
traded on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security will likely
include a profit to the dealer.

In selecting brokers or dealers to execute portfolio transactions on
behalf of the Fund, Cornerstone Advisors will seek the best overall terms
available. The Advisory Agreement provides that, in assessing the best overall
terms available for any transaction, Cornerstone Advisors will consider the
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer and the reasonableness of the commission, if any, for the
specific transaction and on a continuing basis. In addition, the Advisory
Agreement authorizes Cornerstone Advisors in selecting brokers or dealers, to
execute a particular transaction and in evaluating the best overall terms
available, to consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Fund and/or other accounts over which Cornerstone Advisors exercises investment
discretion. The fees payable under the Advisory Agreements are not reduced as a
result of Cornerstone Advisors receiving such brokerage and research services.

The Board of Directors of the Fund will review periodically the
commissions paid by that Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the benefits
inuring to such Fund.

The aggregate amounts paid by CLM in brokerage commissions for the
fiscal years ended December 31, 2001, 2002 and 2003 were $69,714, $18,188 and
$13,413, respectively. None of the brokerage commissions paid by CLM were paid
to affiliated brokers.

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

For information concerning the Dividend Reinvestment and Cash Purchase
Plan, please see CLM's Proxy Statement/Prospectus dated April __, 2004.

TAXATION

The following is a summary of certain material United States federal
income tax considerations regarding the purchase, ownership and disposition of
shares in the Fund. Each prospective shareholder is urged to consult his or her
own tax adviser with respect to the specific federal, state, local and foreign
tax consequences of investing in the Fund. The summary is based on the laws in
effect on the date of this SAI, which are subject to change.

The Fund has qualified and elected to be treated as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"), and intends to continue to so qualify, which requires compliance with
certain requirements concerning the sources of its income, diversification of
its assets, and the amount and timing of its distributions to shareholders. Such
qualification does not involve supervision of management or investment practices
or policies by any government agency or bureau. By so qualifying, the Fund will
not be subject to federal income or excise tax on its net investment income or

B-7

net capital gain which are distributed to shareholders in accordance with the
applicable timing requirements. Net investment income and net capital gain of
the Fund will be computed in accordance with Section 852 of the Code.

The Fund intends to distribute all of its net investment income, any
excess of net short-term capital gains over net long-term capital losses, and
any excess of net long-term capital gains over net short-term capital losses in
accordance with the timing requirements imposed by the Code and therefore will
not be required to pay any federal income or excise taxes. Distributions of net
investment income and net capital gain will be made no later than December 31 of
each year. Both types of distributions will be in shares of the Fund unless a
shareholder elects to receive cash.

If the Fund fails to qualify as a regulated investment company under
Subchapter M in any fiscal year, it will be treated as a corporation for federal
income tax purposes. As such the Fund would be required to pay income taxes on
its net investment income and net realized capital gains, if any, at the rates
generally applicable to corporations. Shareholders of the a Fund would not be
liable for income tax on the Fund's net investment income or net realized
capital gains in their individual capacities. Distributions to shareholders,
whether from the Fund's net investment income or net realized capital gains,
would be treated as taxable dividends to the extent of current or accumulated
earnings and profits of the Fund.

The Fund is subject to a 4% nondeductible excise tax on certain
undistributed amounts of ordinary income and capital gain under a prescribed
formula contained in Section 4982 of the Code. The formula requires payment to
shareholders during a calendar year of distributions representing at least 98%
of the Fund's ordinary income for the calendar year and at least 98% of its
capital gain net income (i.e., the excess of its capital gains over capital
losses) realized during the one-year period ending October 31 during such year
plus 100% of any income that was neither distributed nor taxed to the Fund
during the preceding calendar year. Under ordinary circumstances, the Fund
expects to time its distributions so as to avoid liability for this tax.

Net investment income is made up of dividends and interest less
expenses. Net capital gain for a fiscal year is computed by taking into account
any capital loss carryforward of the Fund.

The following discussion of tax consequences is for the general
information of shareholders that are subject to tax. Shareholders that are IRAs
or other qualified retirement plans are exempt from income taxation under the
Code.

Distributions of taxable net investment income and the excess of net
short-term capital gain over net long-term capital loss are taxable to
shareholders as ordinary income.

Distributions of net capital gain ("capital gain dividends") are
taxable to shareholders as long-term capital gain, regardless of the length of
time the shares of the Fund have been held by such shareholders.

B-8

Distributions of taxable net investment income and net capital gain
will be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date.

All distributions of taxable net investment income and net capital
gain, whether received in shares or in cash, must be reported by each taxable
shareholder on his or her federal income tax return. Dividends or distributions
declared in October, November or December as of a record date in such a month,
if any, will be deemed to have been received by shareholders on December 31, if
paid during January of the following year. Redemptions of shares may result in
tax consequences (gain or loss) to the shareholder and are also subject to these
reporting requirements.

Under the Code, the Fund will be required to report to the Internal
Revenue Service all distributions of taxable income and capital gains, except in
the case of certain exempt shareholders. Under the backup withholding provisions
of Section 3406 of the Code, distributions of taxable net investment income and
net capital gain may be subject to withholding of federal income tax at the rate
of 30.5% in the case of non-exempt shareholders who fail to furnish the
investment company with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law, or if
the Fund is notified by the IRS or a broker that withholding is required due to
an incorrect TIN or a previous failure to report taxable interest or dividends.
If the withholding provisions are applicable, any such distributions and
proceeds, whether taken in cash or reinvested in additional shares, will be
reduced by the amounts required to be withheld.

Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund.

A brief explanation of the form and character of the distribution
accompany each distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions.

THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES AFFECTING
THE FUNDS AND THEIR SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF AN
INVESTMENT IN EITHER FUND.

B-9

FINANCIAL STATEMENTS

(a) The Financial Statements required under this Item are incorporated by
reference herein from the

1. Cornerstone Strategic Value Fund, Inc. Annual Report for the period
ended December 31, 2001, filed with the Securities and Exchange
Commission on March 6, 2002 (File No. 811-5150).

2. Cornerstone Strategic Value Fund, Inc. Annual Report for the period
ended December 31, 2002, filed with the Securities and Exchange
Commission on February 28, 2003 (File No. 811-5150).

3. Cornerstone Strategic Value Fund, Inc. Annual Report for the period
ended December 31, 2003, filed with the Securities and Exchange
Commission on March 8, 2004 (File No. 811-5150).

4. Progressive Return Fund, Inc.'s Annual Report for the period ended
December 31, 2001, filed with the Securities and Exchange Commission on
March 6, 2002 (File No. 811-5891).

5. Progressive Return Fund, Inc.'s Annual Report for the period ended
December 31, 2001, as filed with the Securities and Exchange Commission
on February 28, 2003 (File No. 811-5891).

6. Progressive Return Fund, Inc.'s Annual Report for the period ended
December 31, 2003, as filed with the Securities and Exchange Commission
on March 8, 2004 (File No. 811-5891).

7. Investors First Fund, Inc. Annual Report for the period ended December
31, 2001, filed with the Securities and Exchange Commission on February
28, 2002 (File No. 811-04981).

8. Investors First Fund, Inc. Annual Report for the period ended December
31, 2002, filed with the Securities and Exchange Commission on March 3,
2003 (File No. 811-04981).

9. Investors First Fund, Inc. Annual Report for the period ended December
31, 2003, filed with the Securities and Exchange Commission on March
10, 2004 (File No. 811-04981).

(b) Pro Forma Financial Information

The following table represents the pro forma financial information
based upon the December 31, 2003 audited financial statements that are included
in each Fund's Annual Report to Stockholders.

B-10

Statement of Operations
For the Year ended December 31, 2003 (unaudited)

CLM Acquiring Fund
Acquiring Fund PGF Adjustments Pro Forma
Investment Income
Income:

Interest 461,054 438,724 -- $ 899,778
Dividends 2,379 4,064 -- 6,443
--------- --------- ---------- ------------

Total Investment Income 463,433 442,788 -- 906,221
--------- --------- ---------- ------------

Expenses:
Investment advisory fees 246,113 240,927 37,666(c) 524,706(c)
Audit fees 13,000 13,000 (11,000)(d) 15,000
Legal fees 3,730 4,340 3,930(d) 12,000
Administration fees 50,000 50,000 (47,529)(e) 52,471
Custodian fees 5,970 4,921 1,220(f) 12,111
Printing -- 781 19,219(g) 20,000
Accounting fees 28,413 25,682 (20,833)(h) 33,262
Directors' fees 13,697 15,098 (4,295)(d) 24,500
Transfer agent fees 14,510 18,537 (4,667)(d) 28,380
Stock Exchange listing fees 10,359 14,374 (17,733)(d) 7,000
Insurance 4,604 5,214 (618)(d) 9,200
Other 301 533 1,766(d) 2,600
--------- --------- ---------- ------------
Total Expenses 390,697 393,407 (42,875) 741,229
--------- --------- ---------- ------------
Less: Fee paid indirectly (13,413) (9,030) (22,443)
Less: Fee waivers (82,098) (96,295) 89,250(i) (89,143)
--------- --------- ---------- ------------
Net Expenses 295,186 288,082 629,643
--------- --------- ------------

Net Investment Income 168,247 154,706 (42,875) 276,578
--------- --------- ---------- ------------

Net Realized and Unrealized Gain/(Loss)
on Investments and Foreign
Currency Related Transaction
Net realized gain/(loss) from Investments (231,146) (258,139) (489,285)
Net change in unrealized appreciation/
(depreciation) in value of investments 5,737,591 5,898,393 11,635,984
--------- --------- ------------

Net realized and unrealized gain/(loss)
on investments 5,506,445 5,640,254 11,146,699
--------- --------- ------------

NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 5,674,692 5,794,960 (42,875) 11,423,277
--------- --------- ---------- ------------

B-11

The Cornerstone Strategic Value Fund, Inc.
Progressive Return Fund, Inc.
Notes to Pro Forma Financial Statements (unaudited)

1. Basis of Combination

The unaudited Pro Forma Condensed Portfolio of Investments, Pro Forma
Condensed Statement of Assets and Liabilities and Pro Forma Condensed Statement
of Operations give effect to the proposed merger of Progressive Return Fund,
Inc.(PGF) into The Cornerstone Strategic Value Fund, Inc. ("CLM"). The proposed
merger will be accounted for by the method of accounting for tax-free mergers of
investment companies (sometimes referred to as the pooling-of-interest basis).
The Merger provides for the transfer of all or substantially all of the assets
of PGF to CLM in exchange for CLM common shares, the distribution of such CLM
common shares to common shareholders of PGF and the subsequent liquidation of
PGF. Each share of common stock of PGF will convert into an equivalent dollar
amount of full shares of common stock of CLM based on the net asset value per
share of each Fund.

The pro forma combined statements should be read in conjunction with the
historical financial statements of the constituent Fund and the notes thereto
incorporated by reference in the Registration Statement filed on Form N-14.

CLM is a closed-end, diversified and PGF is a closed-end non-diversified
Management investment companies registered under the Investment Company Act of
1940, as amended.

Pro Forma Adjustments:

The Pro Forma adjustments below reflect the impact of the merger between
CLM and PGF.

(a) To remove certain prepaid expenses associated with PGF, in the statement of
assets and liabilities, which will not be assumed by CLM.

(b) In connection with PGF's intention to merge with CLM; PGF reclass its
treasury shares held to paid-in capital.

(d) Assumes the elimination of duplicative charges resulting from the
combination and reflects management's estimates of combined pro forma
operations.

(e) Adjustment based on the contractual agreement with the Administrator for the
combined Fund.

(f) Adjustment based on the contractual agreement with the custodian for the
combined Fund.

(g) Assumes shareholders' meeting fees are combined with printing and reflects
management's estimates of combined pro forma operations.

(h) Adjustment based on the contractual agreement with the Accounting fees for
the combined Fund.

(i) The Investment Manager voluntarily waives its management fees to the extent
that the Fund's monthly operating expenses exceed 0.10% of net assets
calculated on a monthly basis.

B-12

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies, which are
consistently followed by each of PGF and CLM in the preparation of its financial
statements.

MANAGEMENT ESTIMATES: The preparation of financial statements in
accordance with accounting principles generally accepted in the United States of
America requires management to make certain estimates and assumptions that may
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.

PORTFOLIO VALUATION: Investments are stated at value in the
accompanying financial statements. All equity securities are valued at the
closing price on the exchange or market on which the security is primary traded
("Primary Market"). If the security did not trade on the Primary Market, it
shall be valued at the closing price on another exchange where it trades. If
there is no such sale prices, the value shall be the most recent bid, and if
there is no bid, the security shall be valued at the most recent asked. If no
pricing service is available and there are more than two dealers, the value
shall be the mean of the highest bid and lowest ask. If there is only one
dealer, then the value shall be the mean if bid and ask are available, otherwise
the value shall be the bid. All other securities and assets are valued as
determined in good faith by the Board of Directors. Short-term investments
having a maturity of 60 days or less are valued on the basis of amortized cost.
The Board of Directors has established general guidelines for calculating fair
value of not readily marketable securities. The net asset value per share of
each Fund is calculated weekly and on the last business day of the month with
the exception of those days on which the New York Stock Exchange is closed.

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions
are accounted for on the trade date. The cost of investments sold is determined
by use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.

TAXES: No provision is made for U.S. federal income or excise taxes as it
is each Fund's intention to continue to qualify as a regulated investment
company and to make the requisite distributions to its shareholders which will
be sufficient to relieve it from all or substantially all U.S. federal income
and excise taxes.

DISTRIBUTIONS OF INCOME AND GAINS: Each Fund distributes at least
annually to shareholders, substantially all of its net investment income and net
realized short-term capital gains, if any. Each Fund determines annually whether
to distribute any net realized long-term capital gains in excess of net
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by each Fund on the ex-dividend date.

B-13

The board of Directors of each Fund may, if it it determined to be in the
best interest of each Fund and its shareholders, time to time authorize and
declare distribution that may be substantially characterized as a return of
capital.

The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
U.S. federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.

OTHER: Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.

B-14

Statement of Assets and Liabilities
At December 31, 2003 (unaudited)
Acquiring Fund
CLM Acquiring Fund PGF Adjust- Pro Forma
ASSETS Cost Value Cost Value ments Cost Value
---- ----- ---- ----- ------- ---- -----

Investments, at value 24,461,195 26,575,649 29,275,719 26,067,548 53,736,914 52,643,197
Cash collateral received
for securities loaned 491,232 441,178 932,410
Receivables:
Securities Sold -- -- --
Interest 176 36,023 36,199
Dividends 34,112 112 34,224
Prepaid expenses and other
assets 877 671 (671)(a) 877
---------- ---------- ----------
Total Assets 27,102,046 26,545,532 53,646,907
---------- ---------- ----------

LIABILITIES
Payables:
Upon return of securities
loaned 491,232 441,178 932,410
Investment advisory fee 15,332 17,148 32,480
Other accrued expenses 30,175 31,294 30,195
---------- ---------- ----------
Total Liabilities 536,739 489,620 995,085
---------- ---------- ----------

Net Assets 26,565,307 26,055,912 52,651,822
---------- ---------- ----------

Net Assets Consist Of:
Capital stock, $0.01 par value;
3,849,524 shares issued and
outstanding for CLM (25,000,000
shares authorized) and
$0.001 par value; 1,167,477
shares issued and outstanding
for PGF (100,000,000
shares authorized) 38,495 1,167 39,662
Paid-in-capital 52,228,222 42,839,458 (173,074)(a)(b) 94,894,606
Cost of 2,239,440 and 9,093
shares repurchased,
respectively (26,999,661) (172,403) 172,403(b) (26,999,661)
Accumulated net realized
loss on investments (816,203) (13,404,139) (14,220,342)
Net unrealized appreciation
in value of investments 2,114,454 (3,208,171) (1,093,717)
---------- ---------- ----------
26,565,307 26,055,912 52,620,548
---------- ---------- ----------

B-15

Statement of Operations
For the Year ended December 31, 2003 (unaudited)

CLM Acquiring Fund
Acquiring Fund MGC PGF Adjustments Pro Forma
Investment Income
Income:

Dividends $ 461,054 $ 283,535 $ 438,724 -- $ 1,183,313
Interest 2,379 33,741 4,064 40,184
------------ ------------ ------------ ---------- ------------

Total Investment Income 463,433 317,276 442,788 1,223,497
------------ ------------ ------------ ---------- ------------

Expenses:
Investment advisory fees 246,113 966,400 240,927 152,675(c) 1,606,115(c)
Audit fees 13,000 17,000 13,000 (26,000)(d) 17,000
Legal fees 3,730 783,138 4,340 (766,208)(d) 25,000
Administration fees 50,000 68,623 50,000 (8,011)(e) 160,612
Custodian fees 5,970 17,679 4,921 1,762(f) 30,332
Printing -- 156,683 781 (115,464)(g) 42,000
Accounting fees 28,413 8,196 25,682 (19,416)(h) 42,875
Directors' fees 13,697 221,498 15,098 (225,293)(d) 25,000
Transfer agent fees 14,510 39,445 18,537 (36,492)(d) 36,000
Stock Exchange listing fees 10,359 -- 14,374 (18,733)(d) 6,000
Insurance 4,604 3,275 5,214 (1,093)(d) 12,000
Other 301 23,952 533 (19,786)(d) 5,000
------------ ------------ ------------ ---------- ------------
Total Expenses 390,697 2,305,889 393,407 (1,082,059) 2,007,934
------------ ------------ ------------ ---------- ------------
Less: Fee paid indirectly (13,413) -- (9,030) (22,443)
Less: Fee waivers (82,098) -- (96,295) 120,240(i) (58,153)
------------ ------------ ------------ ---------- ------------
Net Expenses 295,186 2,305,889 288,082 (961,819) 1,927,338
------------ ------------ ------------ ---------- ------------

Net Investment Income 168,247 (1,988,613) 154,706 961,819 (703,841)
------------ ------------ ------------ ---------- ------------

Net Realized and Unrealized
Gain/(Loss) on Investments
and Foreign Currency
Related Transaction
Net realized gain/(loss)
from Investments (231,146) (1,612,545) (258,139) (2,101,830)
Net change in unrealized
appreciation/(depreciation)
in value of investments 5,737,591 24,904,617 5,898,393 42,438,994
------------ ------------ ------------ ------------

Net realized and unrealized
gain/(loss) on investments 5,506,445 23,292,072 5,640,254 40,337,164
------------ ------------ ------------ ------------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 5,674,692 21,303,459 5,794,960 961,819 39,633,323
------------ ------------ ------------ ---------- ------------

B-16

Cornerstone Strategic Value Fund, Inc.
Investor First Fund, Inc.
Progressive Return Fund, Inc.
Notes to Pro Forma Financial Statements (unaudited)

1. Basis of Combination

The unaudited Pro Forma Condensed Portfolio of Investments, Pro Forma
Condensed Statement of Assets and Liabilities and Pro Forma Condensed Statement
of Operations give effect to the proposed merger of Investor First Fund, Inc.
("MGC")and Progressive Return Fund, Inc.("PGF") into The Cornerstone Strategic
Value Fund, Inc. ("CLM"). The proposed merger will be accounted for by the
method of accounting for tax-free mergers of investment companies (sometimes
referred to as the pooling-of-interest basis). The Merger provides for the
transfer of all or substantially all of the assets of MGC and PGF to CLM in
exchange for CLM common shares, the distribution of such CLM common shares to
common shareholders of MGC and PGF and the subsequent liquidation of MGC and
PGF. Each share of common stock of MGC and PGF will convert into an equivalent
dollar amount of full shares of common stock of CLM based on the net asset value
per share of each Fund.

CLM and MGC are closed-end, diversified and PGF is closed-end
non-diversified management investment companies registered under the
Investment Company Act of 1940, as amended.

Pro Forma Adjustments:

The Pro Forma adjustments below reflect the impact of the merger between
CLM, MGC and PGF.

(a) To remove certain prepaid expenses associated with MGC and PGF, in the
statement of assets and liabilities, which will not be assumed by CLM.

(b) In connection with PGF's intention to merge with CLM; PGF reclass its
treasury shares held to paid-in capital.

(d) Assumes the elimination of duplicative charges resulting from the
combination and reflects management's estimates of combined pro forma
operations.

(e) Adjustment based on the contractual agreement with the Administrator for
the combined Fund.

(f) Adjustment based on the contractual agreement with the Custodian for the
combined Fund.

(g) Assumes shareholders' meeting fees are combined with printing and reflects
management's estimates of combined pro forma operations.

(h) Adjustment based on the contractual agreement with the Accounting Agent for
the combined Fund.

(i) The Investment Manager voluntarily waives its management fees to the extent
that the Fund's monthly operating expenses exceed 0.10% of net assets
calculated on a monthly basis.

B-17

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies, which
are consistently followed by each of CLM, MGC and PGF in the preparation of its
financial statements.

MANAGEMENT ESTIMATES: The preparation of financial statements in
accordance with accounting principles generally accepted in the United States
of America requires management to
make certain estimates and assumptions that may affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those
estimates.

B-18

The board of Directors of each Fund may, if it it determined to be in
the best interest of each Fund and its shareholders, time to time authorize
and declare distribution that may be substantially characterized as a
return of capital.

OTHER: Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.

B-19

Statement of Assets and Liabilities
At December 31, 2003 (unaudited)

CLM Acquiring Fund MGC PGF
ASSETS Cost Value Cost Value Cost Value
------ ---- ----- ---- ----- ---- -----

Investments, at value 24,461,195 26,575,649 83,493,540 108,693,843 29,275,719 26,067,548
Cash collateral received
for securities loaned 491,232 25,249,487 441,178
Receivables:
Securities Sold -- 229,896 --
Interest 176 5,420 36,023
Dividends 34,112 42,846 112
Prepaid expenses and
other assets 877 16,377 671
----------- ----------- -----------
Total Assets 27,102,046 134,237,869 26,545,532
----------- ----------- -----------

LIABILITIES
Payables:
Upon return of securities
loaned 491,232 25,249,487 441,178
Investment advisory fee 15,332 110,198 17,148
Other accrued expenses 30,175 601,453 31,294
----------- ----------- -----------
Total Liabilities 536,739 25,961,138 489,620
----------- ----------- -----------

Net Assets 26,565,307 108,276,731 26,055,912
----------- ----------- -----------

Net Assets Consist Of:
Capital stock, $0.01 par
value; 3,849,524 shares
issued and outstanding
for CLM (25,000,000 shares
authorized) and $0.001
par value; 1,167,477 shares
issued and outstanding for
PGF (100,000,000 shares
authorized) 38,495 -- 1,167
Paid-in-capital ($0.01 par
value; 9,860,115 shares
issued and outstanding;
150,000,000 shares
authorized for MGC) 52,228,222 85,386,540 42,839,458
Cost of 2,239,440, 0 and
9,093 shares repurchased,
respectively (26,999,661) -- (172,403)
Accumulated net realized
loss on investments (816,203) (2,310,112) (13,404,139)
Net unrealized appreciation
in value of investments 2,114,454 25,200,303 (3,208,171)
----------- ----------- -----------
26,565,307 108,276,731 26,055,912
----------- ----------- -----------

Acquiring Fund
Pro Forma
Adjustments Cost Value
----------- ---- -----

Investments, at value 137,230,454 161,337,040
Cash collateral received
for securities loaned 26,181,897
Receivables:
Securities Sold 229,896
Interest 41,619
Dividends 77,070
Prepaid expenses and
other assets (17,048)(a) 877
-----------
Total Assets 187,868,399
-----------

LIABILITIES
Payables:
Upon return of securities
loaned 26,181,897
Investment advisory fee 142,678
Other accrued expenses 662,922
-----------
Total Liabilities 26,987,497
-----------

Net Assets 160,880,902
-----------

Net Assets Consist Of:
Capital stock, $0.01 par
value; 3,849,524 shares
issued and outstanding
for CLM (25,000,000 shares
authorized) and $0.001
par value; 1,167,477 shares
issued and outstanding for
PGF (100,000,000 shares
authorized) 39,662
Paid-in-capital ($0.01 par
value; 9,860,115 shares
issued and outstanding;
150,000,000 shares
authorized for MGC) (189,451)(a)(b) 180,264,769
Cost of 2,239,440, 0 and
9,093 shares repurchased,
respectively 172,403(b) (26,999,661)
Accumulated net realized
loss on investments (16,530,454)
Net unrealized appreciation
in value of investments 24,106,586
-----------
160,880,902
-----------

B-20

Statement of Operations
For the Year ended December 31, 2003 (unaudited)

CLM Acquiring Fund
Acquiring Fund MGC Adjustments Pro Forma
-------------- --- ----------- ---------
Investment Income
Income:

Dividends 461,054 283,535 -- 744,589
Interest 2,379 33,741 -- 36,120
------- --------- -------- ---------

Total Investment Income 463,433 317,276 -- 780,709
------- --------- -------- ---------

Expenses:
Investment advisory fees 246,113 966,400 133,821(b) 1,346,334(b)
Audit fees 13,000 17,000 (15,000)(c) 15,000
Legal fees 3,730 783,138 (763,868)(c) 23,000
Administration fees 50,000 68,623 16,010(d) 134,633
Custodian fees 5,970 17,679 2,786(e) 26,435
Printing -- 156,683 (118,683)(f) 38,000
Accounting fees 28,413 8,196 4,869(g) 41,478
Directors' fees 13,697 221,498 (210,695)(c) 24,500
Transfer agent fees 14,510 39,445 (19,955)(c) 34,000
Stock Exchange listing fees 10,359 -- (359)(c) 10,000
Insurance 4,604 3,275 3,121(c) 11,000
Other 301 23,952 (20,753)(c) 3,500
------- --------- -------- ---------
Total Expenses 390,697 2,305,889 (988,705) 1,707,881
------- --------- -------- ---------
Less: Fee paid indirectly (13,413) -- (13,413)
Less: Fee waivers (82,098) -- 3,231(h) (78,867)
------- --------- -------- ---------
Net Expenses 295,186 2,305,889 (985,474) 1,615,601
------- --------- -------- ---------

Net Investment Income 168,247 (1,988,613) 985,474 (834,892)
------- --------- -------- ---------

Net Realized and Unrealized
Gain/(Loss) on Investments
and Foreign Currency Related
Transaction
Net realized gain/(loss) from
Investments (231,146) (1,612,545) (1,843,691)
Net change in unrealized
appreciation/(depreciation)
in value of investments 5,737,591 24,904,617 30,642,208
--------- ---------- ----------

Net realized and unrealized
gain/(loss) on investments 5,506,445 23,292,072 28,798,517
--------- ---------- ----------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 5,674,692 21,303,459 985,474 27,963,625
--------- ---------- -------- ----------

B-21

The Cornerstone Strategic Value Fund, Inc.
Investor First Fund, Inc.
Notes to Pro Forma Financial Statements (unaudited)

1. Basis of Combination

The unaudited Pro Forma Condensed Portfolio of Investments, Pro Forma
Condensed Statement of Assets and Liabilities and Pro Forma Condensed
Statement of Operations give effect to the proposed merger of Investor First
Fund, Inc. (MGC) into The Cornerstone Strategic Value Fund, Inc.
("CLM"). The proposed merger will be accounted for by the method of
accounting for tax-free mergers of investment companies (sometimes referred
to as the pooling-of-interest basis). The Merger provides
for the transfer of all or substantially all of the assets of MGC to CLM in
exchange for CLM common shares, the distribution of such CLM common shares to
common shareholders of MGC and the subsequent liquidation of MGC. Each share
of common stock of MGC will convert into an equivalent dollar amount of full
shares of common stock of CLM based on the net asset value per share of each
Fund.

CLM and MGC are both closed-end, diversified management investment
companies registered under the Investment Company Act of 1940, as amended.

Pro Forma Adjustments:

The Pro Forma adjustments below reflect the impact of the merger between
CLM and MGC.

(a) To remove certain prepaid expenses associated with MGC, in the statement of
assets and liabilities, which will not be assumed by CLM.

(b) Adjustment based on contractual agreement with Investment Manager.

(c) Assumes the elimination of duplicative charges resulting from the
combination and reflects management's estimates of combined pro forma
operations.

(d) Adjustment based on the contractual agreement with the Administrator for
the combined Fund.

(e) Adjustment based on the contractual agreement with the custodian for the
combined Fund.

(f) Assumes shareholders' meeting fees are combined with printing and reflects
management's estimates of combined pro forma operations.

(g) Adjustment based on the contractual agreement with the Accounting fees for
the combined Fund.

(h) The Investment Manager voluntarily waives its management fees to the extent
that the Fund's monthly operating expenses exceed 0.10% of net assets
calculated on a monthly basis.

B-22

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies, which are
consistently followed by each of CLM and MGC in the preparation of its financial
statements.

MANAGEMENT ESTIMATES: The preparation of financial statements in
accordance with accounting principles generally accepted in the United States
of America requires management to
make certain estimates and assumptions that may affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those
estimates.

B-23

The board of Directors of each Fund may, if it it determined to be in
the best interest of each Fund and its shareholders, time to time authorize
and declare distribution that may be substantially characterized as a
return of capital.

OTHER: Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.

B-24

Statement of Assets and Liabilities
At December 31, 2003 (unaudited)

CLM Acquiring Fund MGC
ASSETS Cost Value Cost Value Adjustments
------ ---- ----- ---- ----- -----------

Investments, at value 24,461,195 26,575,649 83,493,540 108,693,843
Cash collateral received
for securities loaned 491,232 25,249,487
Receivables:
Securities Sold -- 229,896
Interest 176 5,420
Dividends 34,112 42,847
Prepaid expenses and
other assets 877 16,377 (16,377)(a)
----------- -----------
Total Assets 27,102,046 134,237,870
----------- -----------

LIABILITIES
Payables:
Upon return of securities
loaned 491,232 25,249,487
Investment advisory fee 15,332 110,198
Other accrued expenses 30,175 601,454
----------- -----------
Total Liabilities 536,739 25,961,139
----------- -----------

Net Assets 26,565,307 108,276,731
----------- -----------

Net Assets Consist Of:
Capital stock, $0.01 par value;
3,849,524 shares issued
and outstanding for CLM
(25,000,000 shares authorized) 38,495 --
Paid-in-capital ($0.01 par value;
9,860,115 shares issued and
outstanding; 150,000,000 shares
authorized for MGC) 52,228,222 85,386,540 (16,997)(a)
Cost of 2,239,440, and 0 shares
repurchased, respectively (26,999,661) --
Accumulated net realized loss
on investments (816,203) (2,310,112)
Net unrealized appreciation in
value of investments 2,114,454 25,200,303
----------- -----------
26,565,307 108,276,731
----------- -----------

Acquiring Fund
Pro Forma
Cost Value
---- -----

ASSETS
Investments, at value 107,954,735 135,269,492
Cash collateral received
for securities loaned 25,740,719
Receivables:
Securities Sold 229,896
Interest 5,596
Dividends 76,959
Prepaid expenses and
other assets 877
-----------
Total Assets 161,323,539
-----------

LIABILITIES
Payables:
Upon return of securities
loaned 25,740,719
Investment advisory fee 125,530
Other accrued expenses 631,629
-----------
Total Liabilities 26,497,878
-----------

Net Assets 134,825,661
-----------

Net Assets Consist Of:
Capital stock, $0.01 par value;
3,849,524 shares issued
and outstanding for CLM
(25,000,000 shares authorized) 38,495
Paid-in-capital ($0.01 par value;
9,860,115 shares issued and
outstanding; 150,000,000 shares
authorized for MGC) 137,597,765
Cost of 2,239,440, and 0 shares
repurchased, respectively (26,999,661)
Accumulated net realized loss
on investments (3,126,315)
Net unrealized appreciation in
value of investments 27,314,757
-----------
134,825,041
-----------

B-25

PART C
OTHER INFORMATION

ITEM 15. INDEMNIFICATION

A policy of insurance covering Cornerstone Advisors, Inc., its
affiliates, and all of the registered investment companies advised by
Cornerstone Advisors insures the Registrant's directors and officers and others
against liability arising by reason of an alleged breach of duty caused by any
negligent act, error or accidental omission in the scope of their duties.

ITEM 16. EXHIBITS.

(1) Copy of the Articles of Incorporation of CLM as now in effect, including any
amendments thereto.

(2) Amended and Restated By-Laws as of February 20, 2004 of the Registrant

(3) Not Applicable

(4)(i) Copy of PGF Agreement and Plan of Reorganization (included as Exhibit A
to the Proxy Statement/Prospectus, which is part of the Registration Statement
on Form N-14).

(4)(ii) Copy of MGC Agreement and Plan of Reorganization (included as Exhibit B
to the Proxy Statement/Prospectus, which is part of the Registration Statement
on Form N-14).

(5) Not Applicable

(6) Copy of the Investment Management Agreement dated as of April 19, 2001
between Cornerstone Advisors, Inc. and CLM - incorporated herein by reference to
Appendix A to CLM's Proxy Statement for the Annual Meeting of Stockholders held
on April 19, 2001 on Schedule 14A as filed with the Commission on March 7, 2001.

(7) Not Applicable

(8) Not Applicable

(9) Copy of the Custody Agreement between CLM and Custodial Trust Company

(10) Not Applicable

(11) Opinion and consent of Counsel, in draft form.

(12) Opinion and consent of Counsel, in draft form, regarding certain tax
matters and consequences to shareholders.

C-1

(13) Not Applicable

(14) Consent of Independent Auditors

(15) Not Applicable

(16) Not Applicable

(17) Not Applicable

ITEM 17. UNDERTAKINGS.

The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act [17 CFR
230.145c], the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.

The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of securities at that time shall be deemed to
be the initial bona fide offering of them.

SIGNATURES

As required by the Securities Act of 1933, this registration statement
has been signed on behalf of the registrant, in the City of New York and the
State of New York, on the 20th day of February, 2004.

CORNERSTONE STRATEGIC VALUE FUND, INC.

By: /S/ RALPH W. BRADSHAW
----------------------------------------
Name: Ralph Bradshaw
Title: President

C-2

As required by the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated:

/S/ ANDREW A. STRAUSS /S/ THOMAS H. LENAGH
----------------------------------- -----------------------------------
Andrew A. Strauss, Director Thomas H. Lenagh, Director

/S/ SCOTT B. ROGERS /S/ EDWIN MEESE
----------------------------------- --------------------------
Scott B. Rogers, Director Edwin Meese III, Director

/S/ RALPH W. BRADSHAW /S/ GLENN W. WILCOX, SR.
------------------------------ ------------------------
Ralph W. Bradshaw, Director Glenn W. Wilcox, Sr., Director

C-3