Edgar Filing: PROGRESSIVE RETURN FUND INC

As filed with the Securities and Exchange Commission
on August 5, 2002

SECURITIES ACT FILE NO. 333- ________

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

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

PROGRESSIVE RETURN 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 Bradshaw, President
Progressive Return 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.
Spitzer & Feldman P.C.
405 Park Avenue
New York, New York 10022
--------------------------------------------------------------------------------
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
($0.001 par value) 36,000,000 $36,000,000 $36,000,000 $3,312

(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 Cornerstone Strategic Value
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.

PROGRESSIVE RETURN 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 Progressive Return Fund, Inc.
o Letter to Stockholders of Cornerstone Strategic Value Fund, Inc.
o Notice of Special Meeting of Stockholders of Progressive Return Fund, Inc.
o Notice of Annual Meeting of Stockholders of Cornerstone Strategic Value
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

INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS

PROGRESSIVE RETURN FUND, INC.
c/o Bear Stearns Funds Management Inc.
383 Madison Avenue
New York, New York 10179
_______, 2002

Dear Stockholder:

We are pleased to invite you to the special meeting of stockholders
(the "PGF Special Meeting") of Progressive Return Fund, Inc., a Maryland
corporation. The Progressive Return Fund, Inc. is sometimes referred to herein
as "PGF" or the "Fund."

The PGF Special Meeting is scheduled to be held at ____ a.m., Eastern
time, on _______________, October __, 2002, at the offices of Bear Stearns Funds
Management Inc., 383 Madison Avenue, New York, New York 10179.

The Board of Directors has called this Meeting to vote on a Merger Agreement and
Plan of Reorganization (the "Plan" or "Merger Agreement"), whereby Cornerstone
Strategic Value Fund, Inc. ("CLM") will merge with and into PGF in accordance
with the Maryland General Corporation Law, and on an amendment to the Fund's
Articles of Incorporation changing the name of the Fund from "Progressive Return
Fund, Inc." to "Progressive Total Return Fund, Inc."

The Board of Directors of the Fund believes that the Merger and name
change are very important to your interest as a stockholder.

The combined Fund will approximately double the size of the Fund and
the Board of Directors believes that this will enable:

(1) lower operating expense ratio, and
(2) enhanced market liquidity.

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 PGF Special Meeting you will be asked to
vote on two matters.

The proposed merger of the funds is described in more detail in the
combined Proxy Statement/Prospectus.

THE BOARD OF DIRECTORS OF THE FUND BELIEVES THAT THE PROPOSED MERGER AND THE
NAME CHANGE ARE IN THE BEST INTERESTS OF THE STOCKHOLDERS AND RECOMMENDS THAT
YOU READ THE ENCLOSED MATERIALS CAREFULLY AND THEN VOTE "FOR" PROPOSALS 1 AND 2.

Your vote is important. To approve the Merger the affirmative vote of a majority
of the Fund's outstanding shares is required. Therefore, a failure to vote would
amount to a vote against the Merger. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN
YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE

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.

CORNERSTONE STRATEGIC VALUE FUND, INC. c/o Bear Stearns Funds
Management, Inc. 383 Madison Avenue New York, New York 10179 _______, 2002 Dear
Stockholder: We are pleased to invite you to the Annual Meeting of Stockholders
(the "CLM Annual Meeting") of Cornerstone Strategic Value Fund, Inc., a Maryland
corporation. Cornerstone Strategic Value Fund, Inc. is sometimes referred to
hereinafter as "CLM" or the "Fund."

The CLM Annual Meeting is scheduled to be held at ___ a.m., Eastern
time, on _____________, October __, 2002, at the offices of Bear Stearns Funds
Management Inc., 383 Madison Avenue, New York, New York 10179.

First, you will be asked to vote on a Merger Agreement and Plan of
Reorganization (the "Merger Agreement"), whereby CLM will merge with and into
Progressive Return Fund, Inc. ("PGF") in accordance with the Maryland General
Corporation Law. As a result of the merger:

o CLM will no longer exist,

o PGF will be the surviving corporation, and

o each share of common stock of CLM will convert into an equivalent
dollar amount (to the nearest one ten-thousandth of one cent) of
shares and fractional shares of common stock of PGF, based on the net
asset value per share of each fund on the date the Merger is
consummated.

The combined Fund will approximately double the size of the Fund and
the Board of Directors believes that this will enable:

(1) lower operating expense ratio, and
(2) enhanced market liquidity.

The proposed merger and the investment policies of the Funds are
described in more detail in the combined Proxy Statement/Prospectus.

CLM's Stockholders are also being asked to vote contgently on three
additionsl proposals. Votes on these proposals will be counted and passed or
defeated only in the event that the Merger is not consummated. In the event that
the CLM Stockholders fail to approve the proposed merger between PGF and CLM,
CLM Stockholders are being asked to vote on the following Proposals:

The second Proposal that CLM Stockholders will be asked to vote on,
and which will take effect only if the merger proposal is not consummated, will
be the election of two (2) Class I nominees standing for re-election to CLM's
Board of Directors, Messrs. Ralph W. Bradshaw and Edwin Meese III.

The third Proposal that CLM Stockholders will be asked to vote on,
and which will take effect only if the merger proposal is not consummated, is
the ratification of the selection of Tait, Weller & Baker as the Fund's
independent accountants for the year ending December 31, 2002.

The fourth Proposal being submitted to CLM Stockholders and, which
will take effect only if the merger proposal is not consummated, is a
stockholder proposal requesting that within 90 days after the CLM Annual Meeting
CLM be converted into an open-end fund.

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 CLM Annual Meeting you will be asked to
vote on four matters.

THE BOARD OF DIRECTORS OF THE FUND BELIEVES THAT THE PROPOSED MERGER IS IN THE
BEST INTERESTS OF THE FUND AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOUR 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 PROPOSALS 2,
AND 3, THE RE-ELECTION OF THE TWO CLASS I DIRECTORS AND THE RATIFICATION OF THE
SELECTION OF TAIT, WELLER & BAKER, ARE IN THE BEST INTERESTS OF THE FUND AND ITS
STOCKHOLDERS AND RECOMMENDS THAT YOU READ THE ENCLOSED MATERIALS CAREFULLY AND
THEN VOTE "FOR" PROPOSALS 2 AND 3.

THE BOARD OF DIRECTORS BELIEVES THAT THE STOCKHOLDER PROPOSAL IS NOT IN THE BEST
INTERESTS OF THE STOCKHOLDERS AND RECOMMENDS THAT YOU VOTE "AGAINST" PROPOSAL 4.

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.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

Notice is hereby given that the Special Meeting of Stockholders (the
"PGF Special 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 _________, October __, 2002, at
___ a.m., Eastern time, for the following purposes:

1. To consider and vote upon the approval of a Merger
Agreement and Plan of Reorganization dated _______,
2002 whereby Cornerstone Strategic Value Fund, Inc.
("CLM"), a Maryland corporation, will merge with and
into PGF in accordance with the Maryland General
Corporation Law;

and in the event that the stockholders of both PGF and CLM
approve the merger proposal, then the stockholders of PGF
will be asked to vote upon PGF Proposal 2:

2. To amend the Articles of Incorporation to change the
name of the Fund from "Progressive Return Fund, Inc."
to "Progressive Total Return Fund, Inc."

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

Holders of record of shares of common stock of PGF at the close of
business on ______ __, 2002 (the "Record Date") are entitled to vote at the PGF
Special Meeting and at any postponements or adjournments thereof. CLM
stockholders must approve the merger as well.

The persons named as proxies may propose one or more adjournments of
the PGF Special 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 Special 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

IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
THE CARD(S) IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS
INTENDED FOR YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S)
MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM
AT THE PGF SPECIAL MEETING. IF YOU CAN ATTEND THE PGF SPECIAL MEETING AND WISH
TO VOTE YOUR SHARES IN PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.

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 _____, October
___, 2002, at ___ a.m., Eastern time, for the following purposes:

1. To consider and vote upon the approval of a Merger
Agreement and Plan of Reorganization dated _______,
2002 whereby CLM will merge with and into Progressive
Return Fund, Inc. ("PGF"), a Maryland corporation, in
accordance with the Maryland General Corporation Law;

and, in the alternative if Stockholders do not approve the
merger proposal, then Stockholders will be asked to vote
upon Proposals 2, 3 and 4:

2. To consider and vote upon the election of two (2) Class
I nominees standing for re-election to CLM's Board of
Directors, Messrs. Ralph W. Bradshaw and Edwin Meese
III;

3. To ratify the selection of Tait, Weller & Baker as the
Fund's independent accountants for the year ending
December 31, 2002; and

4. To consider and vote upon a stockholder proposal
requesting that CLM be converted into an open-end fund.

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 ____ __, 2002 (the "Record Date") are entitled to vote at the CLM
Annual Meeting and at any postponements or adjournments thereof. PGF
stockholders must approve the merger as well.

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

IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
THE CARD(S) IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS
INTENDED FOR YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S)
MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM
AT THE CLM ANNUAL MEETING. IF YOU CAN ATTEND THE CLM ANNUAL MEETING AND WISH TO
VOTE YOUR SHARES IN PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.

DRAFT: FOR DISCUSSION PURPOSES ONLY

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

CORNERSTONE STRATEGIC VALUE FUND, INC.
383 Madison Avenue
New York, New York 10179
Tel: (212) 272-2093

TO BE MERGED WITH AND INTO

PROGRESSIVE RETURN FUND, INC.
383 Madison Avenue
New York, New York 10179
Tel: (212) 272-2093

COMBINED PROXY STATEMENT/PROSPECTUS

This combined Proxy Statement/Prospectus is being furnished to
stockholders of Progressive Return Fund, Inc. ("PGF") and Cornerstone Strategic
Value Fund, Inc. ("CLM") for use at PGF's Special Meeting and CLM's Annual
Meeting each to be held on ________, October __, 2002 at ___ a.m. and ___ a.m.
Eastern time, respectively, and at any and all postponements or adjournments
thereof. Hereinafter the PGF Special Meeting of Stockholders and the CLM Annual
Meeting of Stockholders shall be collectively referred to as the "Meetings." The
approximate mailing date of this Proxy Statement/Prospectus is September __,
2002.

PURPOSE OF THE MEETINGS.

At each of the Meetings, stockholders of each Fund will be asked to
approve a Merger Agreement and Plan of Reorganization dated ______, 2002 (the
"Plan") whereby CLM will merge with and into PGF, in accordance with the
Maryland General Corporation Law. In addition, PGF stockholders will be asked to
approve the amendment to PGF's Articles of Incorporation changing the name of
the Fund in the event that the Merger is consummated. In the event that the
Merger is not consummated, CLM's stockholders will be asked to contingently vote
on the re-election of two nominees to CLM's Board of Directors, the ratification
of Tait, Weller & Baker as the Fund's independent accountants for the year
ending December 31, 2002, and a stockholder's proposal requesting that the Fund
be open-ended.

SPECIFICS OF THE PLAN.
----------------------
As a result of the merger:

- CLM will no longer exist,

- PGF will be the surviving corporation, and

In connection with the merger, PGF 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 CLM. Each CLM stockholder, in connection with the
merger, will receive shares of PGF having an aggregate net asset value equal to
the aggregate net asset value of the stockholder's CLM shares on the day before
the effective date of the Merger. before the merger. While the total net asset
value of shares received by each CLM stockholder in the merger may be the same
as before the merger, the market value of PGF shares that a CLM stockholder
receives in the merger will be more or less than the market value of CLM shares
that such stockholder owns immediately before the merger, depending on the
current market discount levels of CLM and PGF.

If the merger proposal is approved, CLM stockholders will become
stockholders of a non-diversified rather than a diversified management
investment company. PGF, as a non-diversified investment management company may
invest a significant proportion of its assets in a single issuer or industry
than CLM, as a diversified investment company can. Thus, an investment in PGF,
as a non-diversified investment company may present a greater risk to an
investor than an investment in CLM, as a diversified company because of the
possibility of a greater concentration of assets in one issuer or industry.

PGF and CLM are both registered with the Securities Exchange
Commission as closed-end management investment companies and are both listed on
the New York Stock Exchange ("NYSE"). PGF is classified as a non-diversified
management investment company, whereas, CLM is classified as a diversified
management investment company. PGF seeks total return consisting of capital
appreciation and current income by investing primarily in U.S. and non-U.S.
securities. CLM's investment objective is to seek long-term capital appreciation
through investment in equity securities of U.S. and non-U.S. companies. The
current investment objective and policies of PGF will continue unchanged if the
merger occurs.

The terms and conditions of the merger and related transactions are
more fully described in this Proxy Statement/Prospectus and in the Plan, a copy
of which is attached hereto as Exhibit A.

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

Assuming the stockholders of each Fund approve the merger and that
all other conditions contained in the Merger Agreement are satisfied or waived,
the Funds will jointly file articles of merger (the "Articles of Merger"), with
the State Department of Assessments and Taxation of Maryland (the "Department").
The merger will become effective on October __, 2002, or such other date as may
result from the application of the terms of the Merger Agreement (the "Effective
Date"). CLM, as soon as practicable after the Effective Date, will terminate its
registration under the Investment Company Act of 1940, as amended (the
"Investment Company Act").

Under Maryland law, shareholders of PGF and CLM are not entitled to
any appraisal or similar rights in connection with the merger contemplated by
the Plan.

You should retain this Proxy Statement/Prospectus for future
reference as it sets forth concisely information about PGF and CLM that you
should know before voting on the proposals described below.

A Statement of Additional Information (the "SAI") dated September __,
2002, which contains additional information about the merger and the Funds has
been filed with the Securities and Exchange Commission (the "SEC"). The SAI and
financial statements of PGF and CLM for the fiscal year ended December 31, 2001
are incorporated by reference into this Proxy Statement/Prospectus. Please note
that each Fund's semi-annual reports for the period ending June 30, 2002 will be
available approximately on August 31, 2002. Copies of these documents are
available upon request and without charge by 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, or by calling (212) 272-2093. You may ask
questions about the Funds by calling (212) 272-2093. PGF has provided the
information included in this Proxy Statement/Prospectus regarding that Fund and
CLM has provided the information included in this Proxy Statement/Prospectus
regarding that Fund.

PGF's shares of common stock are listed on the NYSE under the symbol
"PGF" and CLM's shares of common stock are listed on the NYSE under the symbol
"CLM". After the Effective Date, shares of common stock of PGF will continue to
be listed on the NYSE under the symbol "PGF". Reports, proxy materials and other
information concerning each Fund may be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005.

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 September __, 2002

TABLE OF CONTENTS
Page
General................................................................... 6

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

Proposal 1 (BOTH FUNDS): APPROVAL
OF THE MERGER AGREEMENT AND
PLAN OF REORGANIZATION.................................................... 9

Synopsis....................................................... 10
Expense Table.................................................. 15
Financial Highlights........................................... 16
Principal Risk Factors......................................... 16
Comparison of Investment Objectives and Policies............... 19
United States Federal Income Taxes............................. 23
Information about the Merger................................... 25
Additional Information about the Funds......................... 31
Management of the Funds........................................ 38
Experts........................................................ 45
Required Vote.................................................. 46
Legal Proceedings.............................................. 46
Legal Opinions................................................. 46

II. ADDITIONAL PROPOSAL TO BE VOTED ON BY PGF STOCKHOLDERS WHICH WILL
ONLY TAKE EFFECT IN THE EVENT THAT PROPOSAL 1 IS APPROVED BY
BOTH FUNDS

PGF Proposal 2: RATIFICATION OF THE CHANGE IN NAME OF THE FUND TO "PROGRESSIVE
TOTAL RETURN FUND, INC.".................................................. 47

III ADDITIONAL PROPOSALS TO BE VOTED ON BY CLM'S STOCKHOLDERS WHICH WILL
ONLY TAKE EFFECT IN THE EVENT THAT PROPOSAL 1 IS NOT APPROVED BY BOTH
FUNDS' STOCKHOLDER'S

CLM Proposal 2: Election of Directors..................................... 48

CLM Proposal 3: Ratification of Selection
of Independent Accountants................................................ 56

CLM Proposal 4: Shareholder proposal requesting that the Fund be
converted into an Open-end Fund........................................... 57

Additional Information.................................................... 61

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

Exhibit B1: Form of PGF Proxy Card........................................ B1-1

Exhibit B2: Form of CLM Proxy Card....................................... B2-1

Exhibit C: Certificate of Amendment to the Articles of Incorporation..... C-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 the Boards of Directors of the Funds. The Board of Directors
of each Fund is soliciting proxies for use at each Fund's respective Meeting.
The mailing address for both Funds 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 Exhibit B) are first
being mailed to stockholders on or about September __, 2002 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, except that in the case of Proposal 4, all
unspecified proxies will be voted "AGAINST" such Stockholder Proposal.

Stockholders of both PGF and CLM will be asked to vote on Proposal 1
-- the approval of the Plan. In the event that the merger proposal is approved
by the stockholders of CLM and PGF, then the PGF stockholders will be asked to
authorize the amendment to PGF's Articles of Incorporation changing the name of
the Fund to "Progressive Total Return Fund, Inc. In the event that the Merger is
not consummated, CLM Stockholders will be asked to contingently vote on Proposal
2 -- the re-election of Messrs. Ralph W. Bradshaw and Edwin Meese III to CLM's
Board of Directors -- Proposal 3 -- the ratification of the selection of Tait,
Weller & Baker as CLM's independent accountants for the year ending December 31,
2002; and -- Proposal 4-- a shareholder proposal requesting the shareholders to
convert CLM to an open-end 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 a Fund, will constitute a quorum for the transaction of business by
such Fund. 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

Proposal 1, to be submitted at the PGF and CLM Meetings, requires the
affirmative vote of a majority of the outstanding shares of common stock of each
Fund.

PGF Proposal 2, to be submitted at the PGF Special Meeting, requires
the affirmative vote of a majority of the outstanding shares of common stock of
PGF.

CLM Proposals 2 and 3, to be submitted at the CLM Annual Meeting,
requires the affirmative vote of a majority of the votes cast at the meeting.

-1-

CLM Proposal 4, to be submitted at the CLM Annual Meeting, requires
the affirmative vote of a majority of the outstanding shares of common stock.

Abstentions and broker non-votes will have the effect of a "no" vote
for Proposal 1, PGF Proposal 2, and CLM's Proposal 4, and will have no effect on
CLM's Proposal 2 and 3.

Proxy solicitations will be made primarily by mail, but solicitations
may also be made by telephone, telegraph or personal interviews conducted by
officers or employees of the Funds, Cornerstone Advisors, Inc., the investment
adviser to each of the Funds (the "Investment Adviser"), Bear Stearns Funds
Management Inc., the administrator to each of the Funds (the "Administrator"),
and Georgeson Shareholder Communication, Inc., a proxy solicitation firm
("Georgeson"). The Funds will bear their respective costs of solicitation.

An agreement between the Funds and Georgeson provides for Georgeson
to provide general solicitation services to the Funds at an estimated cost of
$______, including expenses. The Funds will, upon request, bear the reasonable
expenses of brokers, bank and their nominees who are holders of record of the
Funds' 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
____ __, 2002 (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 June 30, 2002, there were approximately
4,228,516 shares of PGF outstanding, and approximately 3,832,560 shares of
CLM outstanding.

PGF and CLM provide periodic reports to all of their 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 PGF or CLM, without charge, by calling
(212) 272-2093 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 Boards of Directors of the Funds know of no business other than
the proposals described above which will be presented for consideration at each
Fund's respective 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-

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

PROPOSAL 1:

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

On August 2, 2002, the Boards of Directors of both Funds, including a
majority of the Directors who are not "interested persons" (the "Non-interested
Directors"), unanimously:

(1) declared that the merger of CLM with and into PGF is in the best
interest of the Funds and the stockholders,

(2) approved the Plan, and

(3) recommended that the stockholders of each Fund approve the Plan.

Stockholders should note that the Board of Directors of the Funds are
identical, therefore, the Non-interested Directors are "non-interested" with
respect to each Fund s required by the Investment Company Act, they are not at
arms-length with respect to the proposed Merger. The Boards suggest that
stockholder carefully review the information contained in the Proxy
Statement/Prospectus before casting a vote.

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

The Plan is subject to the approval of the stockholders of both Funds
and certain other conditions. It provides for the merger (the "Merger") of CLM
with and into PGF in accordance with the Maryland General Corporation Law (the
"MGCL").

As a result of the Merger:

- CLM will no longer exist,

- PGF will be the surviving corporation, and

- each share of common stock of CLM will convert into an equivalent
dollar amount (to the nearest one ten-thousandth of one cent) of shares and
fractional shares of common stock of PGF, based on the net asset value per share
of each Fund calculated at 4:00 p.m. (New York Time) on the business day
preceding the Effective Date. A "Business Day" is any day on which the NYSE is
open for trading.

PGF's shares outstanding as of the Effective Date will remain issued
and outstanding.

A copy of the Plan is attached to this Proxy Statement/Prospectus as
Exhibit A, and the description of the 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 Merger,
each Fund and additional information that you may find helpful in deciding how
to vote on the 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 Plan. Stockholders of each Fund should read this entire Proxy
Statement/Prospectus carefully.

THE PROPOSED MERGER.

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

- each share of common stock of CLM will convert into an equivalent
dollar amount (to the nearest one ten-thousandth of one cent) of
shares and fractional shares of common stock of PGF, based on the net
asset value per share of each Fund calculated at 4:00 pm (New York
time) on the Business Day preceding the Effective Date;

- PGF stockholders will retain their shares; and

- each stockholder of CLM will become a stockholder of PGF and will
receive, on the Effective Date, that number of shares of common stock
of PGF having an aggregate net asset value equal to the aggregate net
asset value of such stockholder's shares held in CLM as of the close
of business on the Business Day preceding the Effective Date.

If the Merger is not consummated, each Fund will continue as a
separate investment company, and the Board of Directors of each Fund will
consider such other alternatives as it determines to be in the best interests of
its stockholders.

FORM OF ORGANIZATION.
---------------------

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

INVESTMENT OBJECTIVES.
----------------------

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

Each Fund's investment objectives are fundamental, and can only be
changed with the approval of the holders of a majority of its outstanding voting
securities as defined under the Investment Company Act.

The preceding summary of each Fund's investment objectives 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."

-4-

NET ASSETS OF THE FUNDS
-----------------------

At June 30, 2002, PGF had net assets of $28,464,996 and CLM had net
assets of $29,413,776.

FEES AND EXPENSES--PGF AND CLM
------------------------------

Cornerstone Advisors, Inc. ("Cornerstone Advisors" or "Advisor"),
serves as PGF's and CLM's investment adviser. The 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%) of that Fund's average weekly net assets
payable monthly. On June 19, 2002, Cornerstone Advisors agreed to immediately
implement a voluntary expense reimbursement limitation with regard to both funds
under which the Advisor voluntarily waive its management fees to each Fund to
the extent that each Fund's monthly operating expenses exceed .10% of net assets
calculated on a monthly basis. The expenses of the proposed Merger are not
regarded as "operating expenses". The voluntary fee waiver may be changed or
discontinued at any time after December 31, 2002 in the discretion of the
Advisor. The voluntary expense limitation will not, however, be affected by the
Merger.

For the fiscal year ended December 31, 2001, Cornerstone Advisors
earned $331,733 for performing its advisory services to PGF, of which
Cornerstone Advisors, under a different voluntary expense limitation, waived
$1,966 and $276,913 for advisory services to CLM, of which Cornerstone Advisors
waived $58,679. CLM also paid $78,655 as compensation to Clemente Capital, Inc.,
the Fund's investment adviser from January 1, 2001 until April 18, 2001 and
$26,222 to Wilmington Trust Co., the Fund's sub-investment adviser for January
1, 2001 until April 18, 2001.

Bear Stearns Funds Management Inc. ("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 the Administrator all out-of-pocket expenses
incurred by the Administrator 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 the Administrator is
required to attend. For the fiscal year ended December 31, 2001, BSFM earned
$58,976 for services performed on behalf of PGF. BSFM earned $39,658 for
services performed on behalf of CLM for the period April 23, 2001 through
December 31, 2001. In addition, PFPC, Inc., CLM's former administrator, earned
$21,696 for the period January 1, 2001 until April 30, 2001.

Based on June 30, 2002 net assets and projected expenses for the year
2002, in the absence of an expense limitation, PGF's expense ratio would be
expected to be approximately 2.35% Based on similar assumptions, PGF's expense
ratio after the Merger, not including the expenses of the Merger, is projected
to be approximately 1.97%. So long as the voluntary expense limitation described
above is in effect, PGF's expense ratio is expected to be 1.20%. The actual
expense ratios for the current and fiscal years, whether or nott the Merger
occurs, 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 expense
limitation is continued.

-5-

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

DISTRIBUTION POLICIES
---------------------

In June 2002 both Funds announced distribution policies under which
they would distribute fixed monthly amounts. Such amounts have been distributed
in July and August and distributions have been declared by the Boards of
Directors for the months of September and October. 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 distribution policy after the Merger but there can be no guarantee that
the policy will be continued for any specific time period.

UNREALIZED CAPITAL GAINS.
-------------------------

As of July 12, 2002, PGF had approximately $7,812,761 of unrealized
capital losses, representing approximately 29.6% of its net assets. As of that
same date, CLM had approximately $1,711,531 of unrealized capital gains,
representing approximately 6.34% of its net assets. As of July 12, 2002, PGF had
approximately $11,780,944 of capital loss carryforwards. CLM had approximately
$142,060 of capital loss carryforwards as of December 31, 2001.

FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER.
----------------------------------------------

As a condition to the closing of the Merger, both Funds will receive
an opinion of Spitzer & Feldman P.C., counsel to the Funds, stating that the
Merger will constitute a tax-free reorganization within the meaning of Section
368(a)(1) of the Internal Revenue Code of 1986 (the "Code"). Accordingly,
neither CLM, PGF nor the stockholders of either Fund will recognize any gain or
loss as a result of the Merger. The holding period and the aggregate tax basis
of PGF shares (including fractional shares) received by a CLM stockholder will
be the same as the holding period and aggregate tax basis of the shares of CLM
previously held by the stockholder. The holding period and the aggregate tax
basis of the assets received by PGF in the Merger will be the same as the
holding period and the tax basis of such assets in the hands of CLM immediately
before the Merger. For more information about the tax consequences of the
Merger, see "Information about the Merger - Tax Considerations."

The Board of Directors of each Fund considered these positions as
part of their overall process of considering the proposed 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 Merger. The Boards also considered whether the ability to
continue to utilize the capital loss carryforwards should be made a condition to
the effectiveness of the Merger and concluded that it should not. 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 Merger is in the best interests of both Funds and their
stockholders, even if as a consequence there may be "truncation" (restriction on
the utilization) of the capital loss carryforwards under the Internal Revenue
Code."

-6-

Under the Merger Agreement, the Boards of Directors do have the
discretion to consummate the Merger if they are advised that an impairment of
PGF's tax loss carryforwards would result.

DISCOUNT FROM NET ASSET VALUE.
------------------------------

Shares of closed-end funds frequently trade at a market price that is
less than the value of the fund's net assets. The possibility that shares of PGF
and CLM will trade at a discount from its net asset value is a risk separate and
distinct from the risk that such Fund's net asset value will decrease. Except
for limited periods of time, PGF's shares have traded in the market at a
discount, and, as of August 1, 2002, the last trading day immediately before
the announcement of the Merger, traded at a market price discount of ______%.
Similarly, CLM shares have traded in the market at a discount and, as of that
same date, traded at a market price discount of ________%.

EXPENSES OF THE MERGER.
-----------------------

In evaluating the proposed Merger, Cornerstone Advisors has estimated
the amount of expenses the Funds would incur as approximately $140,000, which
includes, but is not limited to, NYSE fees, SEC registration fees, legal and
accounting fees, proxy and distribution costs, and expenses incurred in
connection with the Merger. The aggregate amount of estimated expenses of the
Merger will be allocated equally between the Funds, regardless of whether the
Merger is consummated, including the SEC registration fees and the fees for
listing additional shares of PGF on the NYSE.

The expenses of the Merger are expected to result in a reduction in
net asset value per PGF share of approximately $0.06, and a reduction in net
asset value per CLM share of approximately $0.02.

-7-

EXPENSE TABLE

SHAREHOLDER TRANSACTION EXPENSES PGF CLM PRO FORMA, POST MERGER
--- --- ----------------------

Sales Load (as a percentage of offering price) N/A N/A N/A
Dividend Reinvestment and Cash Purchase Plan $0 $0 $0
Fees
ANNUAL EXPENSES(1)
Investment Advisory Fees 1.00% 1.00% 1.00%
OTHER EXPENSES(2) 1.35% 1.17 0.97%
TOTAL ANNUAL EXPENSES 2.35%(3) 2.17%(3) 1.97%(3)
======== ======== ========

(1) The percentages in the above table expressing annual fund operating
expenses are based on each Fund's operating expenses for the fiscal year
ended December 31, 2001.
(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 Merger.
(3) Total Annual Expenses do not reflect the effect of any expense limitation
reimbursement. Assuming that the voluntary expense limitation reimbursement
continues, the Total Annual Expenses would be 1.20%. Cornerstone Advisors
has committed to the expense limitation through December 31, 2002. The
Advisor may discontinue the expense limitation after the date, in its sole
discretion.

-8-

Example. The purpose of the following example is to help you understand the
costs and expenses you may bear 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 $1,000 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.

PGF CLM PRO FORMA, POST MERGER
1 Year $238 $220 $200

3 Years $733 $679 $618

5 Years $1,255 $1,164 $1,062

10 Years $2,686 $2,503 $2,296

PERFORMANCE.
------------

The table below provides performance data for the period beginning
January 1, 2002 to June 30, 2002, for PGF and CLM based on each Fund's net
asset value and market value. Past performance is not a guarantee of future
results, and it is not possible to predict whether or how investment performance
will be affected by the Merger. It is important to note that prior to January 1,
2001, both Funds' investment objectives were different and the investments made
were not similar either to each other or to the investments made after that
date.

PGF CLM
CUMULATIVE AVERAGE ANNUAL CUMULATIVE AVERAGE ANNUAL

NET ASSET VALUE (11.62)% (11.62)% (18.66)% (18.66)%

MARKET VALUE 4.04% 4.04% (17.72)% (17.72)%

-9-

FINANCIAL HIGHLIGHTS

The information required in this portion is being incorporated by
reference from each Funds Annual Report to Stockholders filed with the
Commission. This information was audited, except as noted, by
PricewaterhouseCoopers LLP whose reports, along with the Funds' financial
statements, are incorporated herein by reference and included in the Funds'
Annual Reports to Stockholders. The 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 (212) 272-2093.

PRINCIPAL RISK FACTORS

Both PGF and CLM 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. The Funds are subject to the general risk that the value of
their 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.

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 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.

-10-

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 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.

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, the 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.

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.

NON-U.S. 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.

-11-

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 the 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 or at, below or above the initial
public offering price. In recent years, shares of both Funds have traded at a
discount to their respective net asset values.

NON-DIVERSIFICATION.Because PGF is classified as "non-diversified"
under the Investment Company Act it can invest a greater portion of its assets
in securities of a single issuer. As a result, PGF will be more susceptible than
CLM, a more widely diversified fund, to any single corporate, economic,
political or regulatory occurrence.

COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES

ORGANIZATION.
-------------

PGF is a closed-end, non-diversified management investment company
registered under the Investment Company Act, and CLM is a closed-end,
diversified management investment company registered under the Investment
Company Act. Both Funds are organized as corporations under the laws of the
State of Maryland. Each Fund is managed and advised by Cornerstone Advisors. The
shares of common stock of each Fund are listed and trade on the NYSE under the
symbols "PGF" and "CLM", respectively. After the Merger, PGF's shares will
continue to trade on the NYSE under the symbol "PGF", while CLM's shares will be
delisted and CLM 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 the 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 the Funds are
similar, there are differences between them, as discussed below. There can be no
assurance that either Fund will achieve its stated objective.

-12-

INVESTMENT OBJECTIVES.
----------------------

PGF
---

PGF's investment objective is to seek total return consisting of
capital appreciation and current income by investing primarily in equity
securities of U.S. and non-U.S. companies and U.S. dollar denominated debt
securities which Fund management believes have 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
or over the counter or by ADRs, IDRs or other forms of depositary receipts.
Depositary receipts are traded like common stocks in the United States, are
typically issued in connection with a U.S. or foreign banks or trust companies
and evidence ownership of underlying securities issued by a foreign corporation.

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. 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.

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

COMPARISON OF INVESTMENT POLICIES.
----------------------------------

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.

-13-

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. Since the Fund's investment
policies emphasize long-term investment in the securities of companies, the
Fund's annual portfolio turnover rate is expected to be relatively low, ranging
between 50% and 75%.

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.

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 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. Since the Fund's investment
policies emphasize long-term investment in the securities of companies, the
Fund's annual portfolio turnover rate is expected to be relatively low, ranging
between 50% and 75%.

-14-

Although CLM has the ability to invest a significant portion of its
assets in non-U.S. companies, the Fund has maintained the investment of at least
94% of its assets in U.S. companies during the period from June 30, 2001 through
June 30, 2002.

Each Fund's foregoing investment policies may be changed by each
Fund's respective Board of Directors without shareholder vote.

CLM'S AND PGF'S NON-PRINCIPAL INVESTMENT POLICIES
-------------------------------------------------

TEMPORARY DEFENSIVE POSITIONS. Each 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 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 investment objective. Each Fund reserves the right to invest all
of its assets in temporary defensive positions.

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. 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.

Under the Investment Company Act, neither Fund may:

- invest more than 5% of its total assets in the securities of any
one investment company, nor

- acquire more than 3% of the outstanding voting securities of any
such company.

As a stockholder in any investment company, each Fund will bear its
ratable share of that investment company's expenses, and would remain subject to
payment of the company's advisory and administrative fees with respect to assets
so invested.

-15-

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. The Funds currently expect 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:

- 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,

- 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

- 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 the Funds 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.

-16-

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.

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

- CLM will no longer exist, and

- PGF will be the surviving corporation and CLM will then:

1) deregister as an investment company under the Investment
Company Act,
2) withdraw from registration under the Securities Exchange Act
of 1934 (the "Exchange Act"),
3) remove its shares of common stock from listing on the NYSE,
and
4) cease its separate existence under Maryland law.

Each share of outstanding stock of CLM will convert into an
equivalent dollar amount of shares of stock of PGF, based on the net asset value
per share of each Fund calculated at 4:00 p.m. (New York time) on the Business
Day preceding the Effective Date. No sales charge or fee of any kind will be
charged to CLM stockholders in connection with their receipt of PGF common stock
in the Merger.

Under Maryland law, 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
Merger. However, any stockholder of either Fund may sell his or her shares of
common stock at any time prior to the Merger on the NYSE.

-17-

The Plan may be terminated and the Merger abandoned, whether before
or after approval by the Funds' stockholders, at any time prior to the Effective
Date:

- by the mutual written consent of the Board of Directors of each
Fund, or

- by either Fund if the conditions to that Fund's obligations under
the Plan have not been satisfied or waived. If the Merger has not
been consummated by December 31, 2002, the 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 MERGER.
-----------------------

The Board of Directors of each Fund considered and unanimously
approved the proposed Merger at separate meetings of each Board held on August
2, 2002. For the reasons discussed below, the Board of Directors of each Fund,
including Non-interested Directors of each Fund, after consideration of the
potential benefits of the Merger to the stockholders of that Fund and the
expenses expected to be incurred by that Fund in connection with the Merger,
unanimously determined that:

- the interests of the existing stockholders of that Fund will not be
diluted as a result of the proposed Merger, and

- the proposed Merger is in the best interests of that Fund.

Three principal factors led to the Boards of Directors to reach these
conclusions: (1) the Merger will create a larger Fund and, consequently, should,
all other factors being equal, result in an expense ratio that is lower than the
expense ratio of either Fund; (2) the larger Fund should provide better market
liquidity for stockholders who want to sell their shares or add to their
holdings; and (3) it has been a prime objective of each Board, through a variety
of actions, to reduce the discount at which shares trade. The Boards believe
that, all other things being equal, a lower expense ratio and better market
liquidity for the shares should lead to a lower discount.

IN THE JUDGMENT OF THE BOARD OF DIRECTORS OF EACH FUND, THE 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 Merger.

-18-

The Boards also considered whether a larger asset base would provide
benefits in portfolio management. In addition, a larger asset size could result
in a more liquid trading market for shares of PGF than either Fund currently
enjoys separately, which might have a positive impact on the discount at which
each Fund's shares have tended to trade. Further, the Merger itself should focus
the attention of a wider circle of securities analysts on PGF, and after the
Merger, may facilitate securities analysts' following of this Fund because the
Merger may eliminate confusion in the marketplace that results from two funds
with a similar objective, and similar policies managed by the same adviser.

There can be no guarantee that any of these potential beneficial
results will be realized.

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

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

(2) expense ratios and information regarding fees and expenses of the
Funds, both currently and on a pro forma basis;

(3) the terms and conditions of the Merger and whether it would
result in dilution of the interests of each Fund and its existing
stockholders;

(4) the compatibility of each Fund's portfolio securities, investment
objective, policies and restrictions;

(5) the tax consequences to each Fund and its stockholders in
connection with the Merger; and

(6) the anticipated expenses of the Merger.

In reviewing issues relating to the structure of the Merger and the
selection of the surviving corporation in the 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 merged fund, and

(5) Cornerstone Advisors' recommendation that PGF be the surviving
corporation.

(6) the relative tax positions of the Funds

-19-

Based on the factors discussed above, the Board of Directors of each
Fund concluded that the expenses of the Merger are outweighed by the benefits
that are anticipated to be derived from the Merger. In addition, the Boards of
each Fund, including the Non-interested Directors of each Fund, have unanimously
concluded that:

- the Merger is in the best interests of each respective Fund, and

- the interests of existing Stockholders of each respective Fund will
not be diluted as a result of the transactions contemplated by the
Plan.

TERMS OF THE MERGER AGREEMENT.
------------------------------

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

At the Effective Date, each share of common stock of CLM will convert
into an equivalent dollar amount of PGF common stock, based on the net asset
value per share of each Fund calculated at 4:00 p.m. (New York time) on the
Business Day preceding the Effective Date. PGF will issue fractional shares to
CLM stockholders.

For purposes of valuing assets in connection with the Merger, the
assets of CLM will be valued pursuant to the principles and procedures
consistently utilized by PGF, which principles and procedures are also utilized
by CLM in valuing its own assets and determining its own liabilities. As a
result, it is not expected that PGF's valuation procedures as applied to CLM's
portfolio securities will result in any difference from the valuation that would
have resulted from the application of CLM's valuation procedures to such
securities. The net asset value per share of PGF common stock will be determined
in accordance with these principles and procedures, and PGF 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.

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

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

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

-20-

The Plan provides, among other things, that the Merger will not take
place without:

- the requisite approval of the stockholders of PGF and CLM, and

- the effectiveness of a Registration Statement on Form N-14.

The 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 Plan. The Plan will automatically
terminate after December 31, 2002 if the Merger has not been consummated, unless
such time is extended by mutual agreement of the Board of Directors of each
Fund.

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

EXPENSES OF THE MERGER.
-----------------------

In evaluating the proposed Merger, Cornerstone Advisors has estimated
the amount of expenses the Funds will incur, including, but not limited to, NYSE
listing fees, SEC registration fees, legal and accounting fees, proxy and
distribution costs, and expenses incurred in connection with the Merger. The
estimated total expenses pertaining to the Merger is approximately $140,000. For
more information about the expenses of the Merger, See "Synopsis-Expenses of the
Merger."

The expenses of the Merger are expected to result in a reduction in
net asset value per PGF share of approximately $0.06, and a reduction in net
asset value per CLM share of approximately $0.02.

TAX CONSIDERATIONS.
-------------------

The Plan and Merger are conditioned upon the receipt by the Funds of
an opinion from Spitzer & Feldman P.C., substantially to the effect that, based
upon the facts, assumptions and representations of the parties, for federal
income tax purposes:

- the Merger will constitute a tax-free "reorganization" within the
meaning of Section 368(a)(1) of the Code, and each Fund will be "a
party to a reorganization" within the meaning of Section 368(b) of
the Code,

- no gain or loss will be recognized by either Fund as a result of
the Merger,

- the basis of the assets of CLM in the hands of PGF will be the same
as the basis of such assets to CLM immediately prior to the Merger,

- the holding period of the assets of CLM in the hands of PGF will
include the period during which such assets were held by CLM,

-21-

- no gain or loss will be recognized by the stockholders of CLM upon
the conversion of their CLM shares into PGF common stock,

- the basis of PGF shares received by the stockholders of CLM will be
the same as the basis of the shares (including fractional share
interests) of CLM exchanged therefor, and

- the holding period of PGF shares (including fractional share
interests) received by the stockholders of CLM will include the
holding period during which the shares of CLM exchanged therefor were
held, provided that at the time of the exchange the shares of CLM
were held as capital assets in the hands of the stockholders of CLM.

While CLM is not aware of any adverse state or local tax consequences
of the proposed 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 authorized stock of PGF consists of One Hundred Million
(100,000,000) shares of common stock, U.S. $0.001 par value. Shares of PGF
entitle its holders to one vote per share. Holders of PGF's common stock are
entitled to share equally in dividends authorized by the Fund's Board of
Directors payable to the holders of such common stock and in the net assets of
PGF 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 PGF
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. PGF holds stockholder meetings annually.

-22-

The following table shows information about the common stock of each
Fund as of June 30, 2002.

PGF AMOUNT AUTHORIZED AMOUNT HELD BY FUND AMOUNT OUTSTANDING
----
COMMON STOCK 100,000,000 203,900 4,228,516

CLM
---

COMMON STOCK 25,000,000 2,177,440 3,832,560

The shares of common stock of PGF and CLM are listed and trade on the
NYSE under the symbols "PGF" and "CLM", respectively. As of June 30, 2002, the
net asset value of PGF common stock was $9.90, and the market price per share
was $8.95. As of that same date, the net asset value of CLM common stock was
$9.20, and the market price per share was $8.05.

DISCOUNT TO NET ASSET VALUE.
----------------------------

Shares of closed-end investment companies, such as the Funds, have
frequently traded 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 the Funds, the common stock
of both Funds has generally traded at a discount to net asset value, and does so
currently. It is not possible to state whether shares of PGF will trade at a
premium or discount to net asset value following the Merger, or the extent of
any such premium or discount. The Directors of both Funds have regularly
considered, and the Directors of PGF will continue to consider, the respective
Fund's market price discount and the effect of the discount on the Fund and its
stockholders.

-23-

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

Closing Market Closing Net Asset Premium/Discount
Quarter Ended High Price ($) Low Price ($) Price ($) Value ($)

3/31/99 54.75 54.75 54.75 68.00 (15.44)
6/30/99 57.25 57.25 57.25 60.84 (5.90)
9/30/99 50.75 50.75 50.75 56.56 (10.27)
12/31/99 52.25 52.25 52.25 61.84 (15.51)
3/31/00 56.75 56.75 56.75 64.40 (11.88)
6/30/00 49.75 49.75 49.75 64.44 (17.69)
9/30/00 44.00 44.00 44.00 55.00 (20.00)
12/31/00 38.00 38.00 38.00 49.48 (23.20)
3/31/01 37.04 37.04 37.04 44.04 (15.89)
6/30/01 40.00 40.00 40.00 45.96 (12.97)
9/30/01 32.00 32.00 32.00 Na Na
12/31/01 36.20 36.20 36.20 40.08 (9.68)
3/31/02 28.04 28.04 28.04 30.96 (9.43)
6/30/02 23.90 23.90 23.90 24.80 (5.65)

-24-

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

Closing Market Closing Net Asset Premium/Discount
Quarter Ended High Price ($) Low Price ($) Price ($) Value ($)
3/31/99 13.12 13.12 13.12 14.55 (9.79)
6/30/99 14.00 14.00 14.00 15.38 (8.97)
9/30/99 13.81 13.81 13.81 15.23 (9.31)
12/31/99 14.25 14.25 14.25 14.95 (4.68)
3/31/00 14.50 14.50 14.50 15.85 (8.52)
6/30/00 13.00 13.00 13.00 15.28 (14.92)
9/30/00 12.06 12.06 12.06 13.72 (12.08)
12/31/00 10.59 10.59 10.59 11.31 (6.37)
3/31/01 7.75 7.75 7.75 9.19 (15.67)
6/30/01 8.35 8.35 8.35 9.68 (13.74)
9/30/01 6.40 6.40 6.40 Na Na
12/31/01 7.75 7.75 7.75 9.31 (16.76)
3/31/02 7.65 7.65 7.65 9.04 (15.38)
6/30/02 6.65 6.65 6.65 7.73 (13.97)

CAPITALIZATION.

The following table shows on an unaudited basis the capitalization of
PGF and CLM as of June 30, 2002 and on a pro forma basis as of that same date
giving effect to the Merger:

(in thousands, except per share values)

PGF CLM PRO FORMA
Net Assets

Shares of Common Stock Outstanding
Net Assets Per Share of Common Stock

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.

-25-

On June 19, 2002, each Fund's Board of Directors authorized the
implementation of a fixed, monthly distribution policy whereby PGF would
distribute on a monthly basis $0.2675 per share and CLM would distribute $0.0825
per share to their respective stockholders. Each distribution could consist of
either income, capital gains, or return of capital, or a combination of all
three. The Board of Directors of PGF, in its continuing discretion, intends to
continue a fixed, monthly distribution policy after the Merger.

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, 2001, 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 public weekly.

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 Program Administrator for the
stockholders in administering 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 "Dividend" and collectively, "Dividends"),
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 NYSE or elsewhere, with cash
allocated to it by the respective Fund ("Open Market Purchases").

-26-

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 dividend.

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

CORPORATE GOVERNANCE PROVISIONS.
--------------------------------

Both Funds are Maryland corporations 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 Board of Directors of each Fund is
divided into three classes each having a term of three years. Each year, the
term of one class expires and the successor or successors elected to such class
will serve for a three-year term. This provision could delay for up to two years
the replacement of a majority of the Board of Directors.

-27-

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:

(i) merger, consolidation or share exchange of either of the Funds
with or into any Principal Shareholder (as defined below);

(ii) issuance by either of the Funds of any securities of either of
the Funds to any Principal Shareholder for cash;

(iii) sale, lease, or exchange by either of all or any substantial
part of the assets of the Funds 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

(iv) The sale, lease or exchange to the Funds, in exchange for
securities of the Funds, 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 1934
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.

BY-LAWS.
--------

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

- 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

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

-28-

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.

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

-29-

Term of
Office Directorships held by Director
Name, Address and Age Position(s) Since Principal Occupation during outside of the Fund Complex*
with Fund past 5 years

CLASS I DIRECTORS SERVING UNTIL THE YEAR 2004 ANNUAL MEETING OF STOCKHOLDERS.

Andrew A. Strauss (48) Director 2000 Attorney and senior member Director of The Small Cap Fund, Inc.
77 Central Avenue of Strauss & Associates, Memorial Mission Hospital Foundation
Suite F P.A., Attorneys, Asheville and Deerfield Episcopal Retirement Community.
Asheville, NC 28801 and Hendersonville, N.C.;
previous President of White
Knight Healthcare, Inc. and
LMV Leasing, Inc., a wholly
owned subsidiary of Xerox
Credit Corporation.

Thomas H. Lenagh (79) Director 2001 Chairman of the Board of Director of Gintel Fund, The Adams
13 Allen's Corner Road Inrad Corp. and Independent Express Corp., Petroleum and
Flemington, NJ 08822 Financial Adviser. Resources Corporation and ICN
Pharmaceuticals.

-30-

CLASS II DIRECTORS SERVING UNTIL THE YEAR 2005 ANNUAL MEETING OF STOCKHOLDERS

Ralph W. Bradshaw (51)** Chairman of 1999 President of Cornerstone Director of The SmallCap Fund, Inc.
One West Pack Square the Board Advisors, Inc., and of the
Suite 1650 and President Funds within the Fund
Asheville, NC 28801 Complex; Vice President,
Deep Discount Advisors,
Inc. (1993-1999).

-31-

CLASS III DIRECTORS SERVING UNTIL THE YEAR 2003 ANNUAL MEETING OF STOCKHOLDERS.

Glenn W. Wilcox, Sr. (70) Director 2000 Chairman of the Board and Director of The Small Cap Fund, Inc.,
One West Pack Square Chief Executive Officer of Wachovia Corp.; Board Trustee and Chairman
Suite 1700 Wilcox Travel Agency. of Appalachian State University; Board
Asheville, NC 28801 Trustee and Director, Mars Hill College;
Director, Champion Industries, Inc.;
Chairman, Tower Associates, Inc. (a
real estate venture).

Scott B. Rogers (46) Director 2000 Chief Executive Officer, Director of A-B Vision Board;
30 Cumberland Ave. Asheville Buncombe Chairman and Director, Recycling
Asheville, NC 28801 Community Christian Unlimited and Interdenominational
Ministry; and President, Ministerial Alliance; Director,
ABCCM Doctor's Medical Southeastern Jurisdiction Urban
Clinic; Appointee, NC Networkers.
Governor's Commission on

Welfare to Work.
------------
* As of January 2, 2002, the Fund Complex is comprised of PGF, CLM, The
Cornerstone Strategic Return Fund, Inc. and EIS Fund, Inc. all of which
are managed by Cornerstone Advisors, Inc. as of that date.
** Mr. Bradshaw is an "interested person" as defined in the Investment
Company Act of 1940 ("Investment Company Act") because he is a
director, officer and 50% shareholder in Cornerstone Advisors, Inc.,
the Fund's investment manager.

With the exception of EIS Fund, Inc., all of the Directors served on
the Board of Directors for each closed-end fund within the Fund Complex that was
managed by Cornerstone Advisors, Inc. ("Cornerstone Advisors"), the Fund's
investment manager, during the year ended December 31, 2001. Messrs. Lenagh and
Meese do not serve as members of the Board of Directors of EIS Fund, Inc.

The following table sets forth, for each Director and for the
Directors as a group, the amount of shares beneficially owned in the Fund as of
June 30, 2002. The information as to beneficial ownership is based on statements
furnished to the Fund by each Director. Unless otherwise noted, beneficial
ownership is based on sole investment power.

-32-

Name of Director Amount of Securities
Beneficially Owned
Edwin Meese III 0
Ralph W. Bradshaw 625
Andrew A. Strauss 100
Thomas H. Lenagh 0
Glenn W. Wilcox Sr. 250
Scott B. Rogers 0
All Directors as a Group 975

-33-

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 June 30, 2002. The information as to
beneficial ownership is based on statements furnished to the Fund by each
Director.

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

Edwin Meese III 0 0
------------------------------- --------------------------- -----------------------------------------------------
------------------------------- --------------------------- -----------------------------------------------------
Ralph A. Bradshaw $10,001-$50,000 $50,001-$100,000
------------------------------- --------------------------- -----------------------------------------------------
------------------------------- --------------------------- -----------------------------------------------------
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
------------------------------- --------------------------- -----------------------------------------------------

-34-

EXECUTIVE OFFICERS

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

Term of
Name, Address and Age Position(s) Office Principal Occupation during past 5 Directorships held by
with Fund Since years Officer

Gary A. Bentz (46) Vice President 2001 Chief Financial Officer of Director of EIS Fund,
One West Pack Square and Treasurer Cornerstone Advisors, Inc., Vice Inc.
Suite 1650 President and Treasurer of The
Asheville, NC 28801 Cornerstone Strategic Return Fund,
Inc., Cornerstone Strategic Value
Fund, Inc. and EIS Fund, Inc.;
Chief Financial Officer of Deep
Discount Advisors, Inc.
(1993-2000).

Thomas R. Westle (48) Secretary 2001 Partner of Spitzer & Feldman P.C.,
405 Park Avenue a law firm, and previous Partner
New York, NY 10022 at Battle Fowler LLP; Secretary of
The Cornerstone Strategic Return
Fund, Inc., Cornerstone Strategic
Value Fund, Inc. and EIS Fund, Inc.

ALL THE DIRECTORS AND OFFICERS OF PGF ARE ALSO DIRECTORS AND OFFICERS
OF CLM. PLEASE SEE CLM PROPOSAL 2 FOR A MORE THOROUGH DISCUSSION OF CLM'S
DIRECTORS AND OFFICERS CAN BE FOUND BELOW IN CLM'S PROPOSAL 2.

Each Fund pays each of its Directors who is not a director, officer,
partner, co-partner or employee of Cornerstone Advisors or any affiliate thereof
a stipend of $6,000, a fee in the amount of $600 per Board Meeting, and a fee of
$100 per Special Telephonic Board Meeting. In addition, each Fund will reimburse
those Directors for travel and out-of-pocket expenses incurred in connection
with Board of Directors meetings. The aggregate remuneration paid to Directors
by PGF during the fiscal year ended December 31, 2001 was $68,816, and the
aggregate remuneration paid to Directors by CLM during the fiscal year ended
December 31, 2001 was $79,200.

-35-

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.

The Articles of Incorporation and By-laws of each Fund provide that
the Fund will indemnify directors and officers and may indemnify employees or
agents of the Fund against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their positions with the
Fund to the fullest extent permitted by law. In addition, each Fund's Articles
of Incorporation provide that the Fund's directors and officers will not be
liable to Stockholders for money damages, except in limited instances.

INVESTMENT ADVISER.
-------------------

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

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 Securities and Exchange Commission under
the Investment Company Act. Cornerstone Advisors is the investment adviser to
two other closed-end funds, The Cornerstone Strategic Return Fund, Inc. and EIS
Fund, Inc. (f/k/a Excelsior Income Shares, Inc.). Mr. Ralph W. Bradshaw, a
Director and President of PGF and CLM, serves as each Fund's portfolio manager.

Mr. Bradshaw and Mr. Gary A. Bentz, a Director of EIS Fund, Inc., are
the sole stockholders of Cornerstone Advisors. Messrs. Bradshaw and Bentz have
extensive experience with closed-end investment companies. Mr. Bradshaw, also
serves as a Director to The Smallcap Fund, Inc., EIS Fund, Inc. and The
Cornerstone Strategic Return Fund, and served as a Vice President of Deep
Discount Advisors, Inc. ("Deep Discount") from 1993 to 1999. Mr. Bentz currently
serves as Treasurer and Vice President of PGF, CLM and the two other funds for
which Cornerstone Advisors serves as investment adviser, was also affiliated
with Deep Discount as its Chief Financial Officer from 1993 to 2000. Messrs.
Bradshaw and Bentz no longer possess any ownership interest in Deep Discount nor
do they provide any investment advisory services to Deep Discount or its
clients. Deep Discount and Ron Olin Investment Management Company ("ROIMC"),
both of which jointly filed a Schedule 13G with the Securities and Exchange
Commission (the "SEC") on February 15, 2002 as beneficial owners of more than
five (5%) percent of the outstanding shares of each Fund, are registered
investment advisers which, on behalf of their respective advisory clients,
invest in the common stock of closed-end investment companies. There exists no
arrangements or understandings among Cornerstone Advisors, Deep Discount, ROIMC
or any of their respective stockholders with respect to the Funds.

Cornerstone Advisors has sole investment discretion for each Fund's
assets under the supervision of each Fund's Board of Directors and in accordance
with each Fund's stated policies. Cornerstone Advisors selects investments for
each Fund and places purchase and sale orders on behalf of the Funds.

-36-

ADMINISTRATOR.

Bear Stearns Funds Management Inc. ("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:

- oversight of the determination and publication 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,

- maintenance of the books and records of each Fund as required under
the Investment Company Act,

- preparation of each Fund's U.S. federal, state and local income tax
returns,

- preparation of financial information for each Fund's proxy
statements and semiannual and annual reports to Stockholders, and

- preparation of certain of each Fund's reports to the SEC.

As of June 30, 2002, BSFM provided accounting and/or administrative
services for 29 investment companies and investment partnerships, with combined
total assets of approximately $6.6 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:

- expenses for legal and independent accountants' services,

- costs of printing proxies, stock certificates and stockholder
reports,

- charges of the custodians, and the transfer and dividend- paying
agent's expenses in connection with the Funds' Dividend Reinvestment
and Cash Purchase Plan,

-37-

- fees and expenses of unaffiliated directors,

- accounting and pricing costs,

- membership fees in trade associations,

- fidelity bond coverage for the Funds' officers and employees,

- directors' and officers' errors and omissions insurance coverage,

- brokerage costs and stock exchange fees,

- taxes,

- stock exchange listing fees and expenses, and

- other extraordinary or non-recurring expenses and other expenses
properly payable by the Funds.

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:

-38-

PGF(1) CLM

SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT % AMOUNT %% OF
------------------------------------

Deep Discount Advisors, Inc. (2) 721,900 16.8% 734,580 18.5%
One West Pack Square
Suite 777
Asheville, NC 28801

Ron Olin Investment Management Company (2) 1,812,600 42.2% 708,900 17.9%
One West Pack Square
Suite 777
Asheville, NC 28801

Ronald G. Olin (3) 356,707 33.1% N/A
One West Pack Square
Suite 777
Asheville, NC 28801

Karpus Management, Inc. (4) N/A 550,425 14.3%
D/b/a Karpus Investment Management
183 Sullys Trail
Pittsford, NY 14534

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

(1) This column accurately reflects the Schedule 13G/As as of the date of
filing and may not take into account the effect of the one-for-four
reverse stock split that occurred on April 22, 2002. While the number
of securities may have been reduced by a factor of four, the
percentage of ownership is still accurately stated in the Schedule
13G/As.

(2) Based solely upon information presented in a Schedule 13G/A, dated
February 15, 2002 (for PGF) and February 13, 2002 (for CLM), filed
jointly by Deep Discount Advisors, INc. and Ron Olin Investment
Management Company.

(3) Based solely upon information presented in a Schedule 13G/A, dated
June 27, 2002, which reflects the effect of the reverse stock split.

(4) Based solely upon information presented in a Schedule 13D/A, dated
July 9, 2002, filed by Karpus Management, Inc.. The Fund does not
not have any knowledge of who the ultimate beneficiaries are of the
Fund's shares.

-39-

All the directors and executive officers, as a group, of PGF, as of
June 30, 2002, owned less than 1% of the outstanding shares of PGF, and all the
directors and executive officers, as a group, of CLM, as of the same date, owned
less than 1% of the outstanding shares of CLM.

EXPERTS

Each Fund previously used PricewaterhouseCoopers LLP, Two Commerce
Square, Philadelphia, PA 19103, as its independent public accountants who
audited each Funds financial statements for the fiscal year ended December 31,
2001. On April 19, 2002, PGF's stockholders ratified the selection of Tait,
Weller & Baker as the Fund's independent accountants for the year ending
December 31, 2002.

Currently, CLM, in the event that the Merger is not consummated, is
requesting that the Fund's stockholders contingently ratify the decision, by the
Fund's Board of Directors, to engage Tait, Weller & Baker as independent public
accountants. See CLM Proposal 3.

REQUIRED VOTE

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

LEGAL PROCEEDINGS

There are currently no material legal proceedings to which the Funds
are a party.

LEGAL OPINIONS

Certain legal matters in connection with the Merger will be passed
upon for the Funds by Spitzer & Feldman P.C.

-40-

II. ADDITIONAL PROPOSAL TO BE VOTED ON BY PGF STOCKHOLDERS WHICH WILL ONLY TAKE
EFFECT IN THE EVENT THAT PROPOSAL 1 IS APPROVED BY BOTH FUNDS STOCKHOLDERS.

PGF PROPOSAL 2

RATIFICATION OF THE CHANGE IN THE NAME OF THE FUND FROM "PROGRESSIVE RETURN
FUND, INC." TO "PROGRESSIVE TOTAL RETURN FUND, INC."

In connection with the proposed merger of PGF and CLM, the Board of
Directors of PGF authorized an amendment to PGF's Articles of Incorporation to
change the name of the Fund from "Progressive Return Fund, Inc." to "Progressive
Total Return Fund, Inc." which will only take effect in the event that the
proposed merger is approved by the shareholders of both Funds. Under the
Maryland General Corporation Law, an amendment to a Charter, which changes the
name of the corporation, must be authorized 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 August 2, 2002, the Board
of Directors unanimously authorized the amendment to the Articles of
Incorporation to change the name of the Fund from "Progressive Return Fund,
Inc." to "Progressive Total Return Fund, Inc.", as set forth on Exhibit C.

Accordingly, the Board of Directors believes that, subject to
shareholder ratification of PGF Proposal 2, changing the name of the Fund to
"Progressive Total Return Fund, Inc." is necessary and appropriate and in the
best interests of the Fund and its shareholders.

REQUIRED VOTE

Ratification of the name change requires the affirmative vote of the
holders of a majority of the Fund's outstanding voting securities. If the name
change 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
THE FUND'S ARTICLES OF INCORPORATION TO CHANGE THE NAME OF THE FUND FROM
"PROGRESSIVE RETURN FUND, INC." TO "PROGRESSIVE TOTAL RETURN FUND, INC."

-41-

III. ADDITIONAL PROPOSALS TO BE VOTED ON BY CLM'S STOCKHOLDERS WHICH WILL ONLY
TAKE EFFECT IN THE EVENT THAT PROPOSAL 1 IS NOT APPROVED BY CLM'S
STOCKHOLDERS.

CLM PROPOSAL 2:

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 the Meeting, stockholders will be asked to elect two Class I
Directors to hold office until the year 2005 Annual Meeting of Stockholders or
thereafter until each of their respective successors is duly elected and
qualified. The term of office of the Class II Directors, currently consisting of
Messrs. Thomas H. Lenagh and Scott B. Rogers, expires at the year 2003 Annual
Meeting of Stockholders or thereafter in each case until their successors are
duly elected and qualified. The term of office of the Class III Directors,
Messrs. Glenn W. Wilcox, Sr. and Andrew A. Strauss, expires at the year 2004
Annual Meeting of Stockholders or thereafter in each case until their successors
are duly elected and qualified.

At the Meeting, stockholders will be asked to vote for the election
of Messrs. Ralph W. Bradshaw and Edwin Meese III as Class I Directors to serve
until the year 2005 Annual Meeting of Stockholders or thereafter until each of
their successors 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.

The persons named in the accompanying form of proxy intend to vote at
the Meeting (unless directed not to vote) FOR the election of Messrs. Ralph W.
Bradshaw and Edwin Meese III. Each nominee has indicated that he will serve if
elected, and the Board of Directors has no reason to believe that any of the
nominees named above will become unavailable for election as a director, but if
any nominee should be unable to serve, the proxy will be voted for any other
person determined by the persons named in the proxy in accordance with their
judgment.

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

-42-

NOMINEES

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

CLASS I INDEPENDENT NOMINEE TO SERVE UNTIL THE YEAR 2005 ANNUAL MEETING OF
STOCKHOLDERS:

Edwin Meese III (70) Director 2001 Distinguished Fellow, The
The Heritage Foundation Heritage Foundation,
214 Massachusetts Ave. NE Washington D.C.;
Washington D.C. 20002 Distinguished Visiting
Fellow at the Hoover
Institution, Stanford
University; Distinguished
Senior Fellow at the
Institute of United States
Studies, University of
London; and Formerly U.S.
Attorney General under
President Ronald Reagan.
INTERESTED DIRECTOR:
Ralph W. Bradshaw (51)** Chairman of 1998 President of Cornerstone Director of The SmallCap Fund
One West Pack Square the Board Advisors, Inc., and of the
Suite 1650 and President Funds within the Fund
Asheville, NC 28801 Complex; Vice President,
Deep Discount Advisors, Inc.

(1993-1999).
------------
* As of January 2, 2002, the Fund Complex is comprised of CLM, PGF, The
Cornerstone Strategic Return Fund, Inc. and EIS Fund, Inc. all of
which are managed by Cornerstone Advisors, Inc.
** Mr. Bradshaw is an "interested person" as defined in the Investment
Company Act of 1940 ("Investment Company Act") because he is a
director, officer and 50% shareholder in Cornerstone Advisors, Inc.,
the Fund's investment manager.

-43-

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:

Term of Directorships held by Director
Name, Address and Age Position(s) Office Principal Occupation during Outside of Fund Complex*
with Fund Since past 5 years

CLASS II INDEPENDENT DIRECTORS SERVING UNTIL THE YEAR 2003 ANNUAL MEETING OF
STOCKHOLDERS:

Scott B. Rogers (46) Director 2000 Chief Executive Officer, Director of A-B Vision Board;
30 Cumberland Ave. Asheville Buncombe Chairman and Director, Recycling
Asheville, NC 28801 Community Christian Unlimited and Interdenominational
Ministry; and President, Ministerial Alliance; and Director,
ABCCM Doctor's Medical Southeastern Jurisdiction Urban
Clinic; Appointee, NC Networkers.
Governor's Commission on
Welfare to Work.

Thomas H. Lenagh (79) Director 1987 Chairman of the Board of Director of Gintel Fund, The Adams
13 Allen's Corner Road Inrad Corp. and Independent Express Company., Petroleum and
Flemington, NJ 08822 Financial Adviser. Resources Corporation and ICN
Pharmaceuticals International.

CLASS III INDEPENDENT DIRECTORS SERVING UNTIL THE YEAR 2003 ANNUAL MEETING OF
STOCKHOLDERS:

Glenn W. Wilcox, Sr. (70) Director 2000 Chairman of the Board and Director of The Small Cap Fund, Inc.,
One West Pack Square Chief Executive Officer of Wachovia Corp.; Board Trustee and Chairman
Suite 1700 Wilcox Travel Agency. of Appalachian State University; Board
Asheville, NC 28801 Trustee and Director, Mars Hill College;
Director, Champion Industries,
Inc.; and Chairman, Tower
Associates, Inc. (a real estate
venture)

-44-

CLASS III INDEPENDENT DIRECTORS CONTINUED:

Andrew A. Strauss (48) Director 2000 Attorney and senior member Director of he Small Cap Fund, Inc.,
77 Central Avenue of Strauss & Associates, Memorial Mission Hospital Foundation and
Suite F P.A., Attorneys, Asheville Deerfield Episcopal Retirement Community.
Asheville, NC 28801 and Hendersonville, NC;
previous President of White
Knight Healthcare, Inc. and
LMV Leasing, Inc., a wholly
owned subsidiary of Xerox
Credit Corporation.

---------
* As of January 2, 2002, the Fund Complex is comprised of CLM, PGF, The
Cornerstone Strategic Return Fund, Inc. and EIS Fund, Inc. all of which are
managed by Cornerstone Advisors.

-45-

With the exception of EIS Fund, Inc., all of the Directors and
Nominees for Directors served on the Board of Directors for each closed-end fund
within the Fund Complex that was managed by Cornerstone Advisors, Inc.
("Cornerstone Advisors"), the Fund's investment manager, during the year ended
December 31, 2001.

The following table sets forth, for each Director and for the
Directors as a group, the amount of shares beneficially owned in the Fund as of
June 30, 2002. The information as to beneficial ownership is based on
statements furnished to the Fund by each Director. Unless otherwise noted,
beneficial ownership is based on sole investment power.

Amount of Securities
Name of Director Beneficially Owned
---------------------------- -------------------------------------
---------------------------- -------------------------------------

Edwin Meese III 0
Ralph W. Bradshaw 3,000
Andrew A. Strauss 600
Thomas H. Lenagh 0
Glenn W. Wilcox Sr. 1,000
Scott B. Rogers 0
-------
All Directors as a Group 4,600
=======

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, 2001. The information as to
beneficial ownership is based on statements furnished to the Fund by each
Director.

-46-

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

Edwin Meese III 0 0
Ralph W. Bradshaw $10,001-$50,000 $50,001-$100,000
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

EXECUTIVE OFFICERS

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

Term of
Name, Address and Age Position(s) Office Principal Occupation during Directorships held by Officer
with Fund Since past 5 years
------------------------------- ---------------- ------------ -------------------------------- ------------------------------
------------------------------- ---------------- ------------ -------------------------------- ------------------------------

Gary A. Bentz (46) Vice President 2001 Chief Financial Officer of Director of EIS Fund, Inc.
One West Pack Square and Treasurer Cornerstone Advisors, Inc.,
Suite 1650 Vice President and Treasurer
Asheville, NC 28801 of Progressive Return Fund,
Inc., The Cornerstone
Strategic Return Fund, Inc.
and EIS Fund, Inc.; Chief
Financial Officer of Deep
Discount Advisors, Inc.
(1993-2000).

Thomas R. Westle (48) Secretary 2001 Partner of Spitzer & Feldman
405 Park Avenue P.C., a law firm, and previous
New York, NY 10022 Partner at Battle Fowler LLP;
Secretary of Progressive
Return Fund, Inc., The
Cornerstone Strategic Return
Fund, Inc. and EIS Fund, Inc.

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 manager during its prior
fiscal year. The following table provides information concerning the
compensation paid during the year ended December 31, 2001, to each Director of
the Fund. All of the Directors received compensation for serving as a Director
of The Cornerstone Strategic Return Fund, Inc. and Progressive Return Fund,
Inc., which were also managed by Cornerstone Advisors during the year ended
December 31, 2001. Please note that the Fund has no bonus, profit sharing,
pension or retirement plans.

-47-

Total Compensation
Aggregate From Fund and
Director Compensation From Fund Complex*
Name of Director Since Fund Paid to Director
---------------- ----- ---- ----------------
Ralph W. Bradshaw 1998 $17,500 $58,621
Glenn W. Wilcox, Sr. 2000 $10,000 $26,150
Andrew A. Strauss 2000 $10,000 $26,150
Edwin Meese III 2001 $7,500 $22,450
Scott B. Rogers 2000 $10,000 $26,150
Thomas H. Lenagh 1987 $10,000 $23,000
William A. Clark** 1999 $12,500 $31,745

---------------
* For compensation purposes, Fund Complex refers to CLM, PGF and The
Cornerstone Strategic Return Fund, Inc. all of which were managed by
Cornerstone Advisors during the year ended December 31, 2001.
** Mr. Clark resigned from his position as a member of the Board of Directors
of the Fund on January 31, 2001.

Each Director attended at least seventy-five (75%) percent or more of
the six (6) meetings of the Board of Directors (including regularly scheduled
and special meetings) held during the period for which he was a Director.

The Fund has a nominating committee which is comprised of the all of
the non-interested directors.

AUDIT COMMITTEE

The Fund's Audit Committee is currently composed of five independent
directors, Messrs. Wilcox, Strauss, Meese, Lenagh and Rogers. The principal
functions of the Audit Committee include but are not limited to: (i)
recommendations to the Board for the appointment of the Fund's independent
accountants; (ii) review of the scope and anticipated cost of the independent
accountant's audit; and (iii) consideration of the independent accountant's
reports concerning their conduct of the audit, including any comments or
recommendations the Board of Directors might make in connection thereto. The
Audit Committee convened three times during the fiscal year ended December 31,
2001. Each member of the Audit Committee attended at least seventy-five percent
(75%) or more of the three meetings of the Audit Committee.

-48-

On June 1, 2000, the Audit Committee, followed by the full Board of
Directors, adopted a written charter setting forth the duties and
responsibilities of the Audit Committee, and such charter was reapproved by the
Board of Directors on February 9, 2001 and February 14, 2002, respectively. The
Audit Committee recommends to the Board of Directors, subject to stockholder
approval, the selection of Tait, Weller & Baker, as the Fund's independent
accountants.

On February 25, 2002, the Board of Directors and the Audit Committee
determined to replace PricewaterhouseCoopers LLP ("PwC") as the Fund's
independent accountants. PwC's accountant report for the past two years did not
contain any adverse opinion or any qualification as to uncertainty, audit scope
or accounting principles. Further, the Board's decision to replace PwC was not
due to any disagreement on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure.

The following table sets forth the aggregate fees billed by
PricewaterhouseCoopers LLP, the independent accountants for the Fund's most
recent fiscal year, for professional services rendered for: (i) the audit of the
Fund's annual financial statements and the review of financial statements
included in the Fund's reports to stockholders ("Audit Fees"); (ii) financial
information systems design and implementation services provided to the Fund, its
investment manager and entities that control, are controlled by or under common
control with the Fund's investment manager that provides services to the Fund
("Financial Information Systems Design"); and (iii) all other services provided
to the Fund, its investment manager and entities that control, are controlled by
or under common control with the Fund's investment manager that provides
services to the Fund ("All Other Fees").

AUDIT FEES FINANCIAL INFORMATION ALL OTHER FEES
SYSTEMS DESIGN
---------- --------------------- --------------
$29,750 $0 $3,000

The Fund has no compensation committees.

AUDIT COMMITTEE REPORT

The Audit Committee has met and held discussions with the Fund's
Administrator, Bear Stearns Funds Management Inc., and the Fund's independent
accountants. The independent accountants represented to the Audit Committee that
the Fund's financial statements were prepared in accordance with U.S. generally
accepted accounting principles, and the Audit Committee has reviewed and
discussed the financial statements with the Fund's Administrator and its
independent accountants. The Audit Committee also discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61.

The Fund's independent accountants also provided to the Audit
Committee the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the Audit
Committee discussed with the independent accountants' their independence, in
light of the services they were providing.

-49-

Based upon the Audit Committee's discussion with the Fund's
Administrator and the independent accountants and the Audit Committee's review
of the representations of the independent accountants to the Audit Committee,
the Audit Committee recommended that the Board of Directors include the audited
financial statements in the Fund's Annual Report for the fiscal year ended
December 31, 2001 filed with the Securities and Exchange Commission.

Respectfully submitted,

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

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 Securities and Exchange
Commission and the New York Stock Exchange, Inc. The Fund believes 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, 2001.

REQUIRED VOTE

Directors are elected by a plurality (a simple majority of the votes
cast at the meeting) of the votes cast by the holders of shares of common stock
of the Fund present in person or represented by proxy at a meeting with a quorum
present. For purposes of the election of Directors, abstentions and broker
non-votes will be counted as shares present for quorum purposes, will be
considered votes cast, and will affect the plurality vote required for
Directors.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ELECTION OF MESSRS. EDWIN MEESE III AND RALPH W. BRADSHAW AS CLASS I
DIRECTORS OF THE FUND.

-50-

CLM PROPOSAL 3:

RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS

The second proposal to be submitted will be the ratification or
rejection of the selection by the Board of Directors of Tait, Weller & Baker as
independent accountants of the Fund for the year ending December 31, 2002. At a
meeting held on February 25, 2002, the Board of Directors, including those
directors who are not "interested persons" of the Fund, approved the selection
of Tait, Weller & Baker for the year ending December 31, 2002 and determined to
replace PricewaterhouseCoopers LLP. Such selection is being submitted to the
stockholders for ratification. The engagement of Tait, Weller & Baker is
conditioned on the right of the Fund, by majority vote of its stockholders, to
terminate such employment.

Tait, Weller & Baker has informed the Fund that it has no material
direct or indirect financial interest in the Fund. A representative of Tait,
Weller & Baker will be available by telephone at the Meeting and will have the
opportunity to make a statement if the representative so desires and will be
available to respond to appropriate questions.

REQUIRED VOTE

Ratification of the selection of Tait, Weller & Baker as independent
accountants of the Fund requires the affirmative vote of the holders of a simple
majority, defined as a majority of the votes cast by holders of shares of common
stock of the Fund present in person or represented by proxy at a meeting with a
quorum present. For purposes of this proposal, abstentions and broker non-votes
will be counted as shares present at the Meeting for quorum purposes and will
have no effect on the outcome of this proposal.

THE BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS, RECOMMENDS
THAT THE STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF TAIT, WELLER & BAKER AS THE
FUND'S INDEPENDENT ACCOUNTANTS.

-51-

CLM PROPOSAL 4:

SHAREHOLDER PROPOSAL REQUESTING THAT THE FUND
BE CONVERTED INTO AN OPEN-END FUND

Karpus Management, Inc. d/b/a Karpus Investment Management ("KIM"),
183 Sully's Trail, Pittsford, New York, New York 14534, has submitted the
following proposal for inclusion in this Proxy Statement. KIM claims that it has
owned shares of the Fund with a market value of at least $2,000 continuously for
the preceding year and intends to maintain the required ownership through the
date of the Meeting. The Board of Directors and the Fund accept no
responsibility for the accuracy of either the proposal or of KIM's supporting
statement.

STOCKHOLDER PROPOSAL

Karpus Investment Management proposes: Cornerstone Strategic Value
Fund, Inc. (CLM) be converted to an open-end fund within 90 days after
acceptance by the shareholders.

SUPPORTING STATEMENT

It is the belief of KIM that current Fund Management of CLM is not
making significant strides in closing the discount at which the Fund trades. For
the time period from January 5, 2001 through December 7, 2001 the Fund has
traded at an average discount of 15.79%.

Management claims that the share buy back program can help close this
discount over time. It is the opinion of KIM this can not happen simply by the
Fund repurchasing shares. KIM believes that drastic steps must occur for the
shareholders to recognize the full economic value of their investment.

KIM believes the only way for shareholders to reap the full value of
their investment is to open-end the Fund. If this would occur, shareholders
would immediately increase the value of their investment by 14.46% (based on the
net asset value of December 7, 2001)!

It is the opinion of KIM that the current Fund Management may not
have sufficient experience to be the best choice for managing the Fund. KIM
believes that the Fund's Manager lacks adequate experience in managing
individual securities (only funds in a closed-end format). The current manager
does not have a track record, known to KIM, to instill our confidence in their
abilities.

Poor performance in both price and net asset value does not have to
be tolerated by the shareholders. Management will claim that they are doing a
good job and they have not been the manager long enough for shareholders to
recognize their abilities. KIM believes that the shareholders must act now. Time
is not on the side of the shareholders to wait!

From January 4, 2001 through December 6, 2001 the net asset value
performance of CLM has equaled - 19.4518% (-20.9417 annual equivalent). The
price performance of the Fund has been equally dismal. For the same holding
period price performance equaled -20.80% (-22.3781 annual equivalent)(All
calculations by Bloomberg). KIM believes that the shareholders deserve better
performance than what has been delivered in 2001.

CLM is plagued by low trading volume. Trading volume from January 4,
2001 through December 6, 2001 has averaged a mere 8,706 shares. It is KIM's
opinion that shareholders who wish to liquidate large positions could severely
depress the price at which the Fund trades. This could cause economic harm to
shareholders remaining in CLM.

-52-

KIM believes open ending is the only possible method for shareholders
to recognize the economic reality of their investment. Open ending would allow
shareholders, such as KIM, who do not have confidence in the direction of the
Fund's management, to get out of the Fund.

Should CLM be open ended at net asset value, shareholders would
recognize an immediate economic benefit of approximately 14.46% (based on price
of $7.93 and NAV of $9.27 as of 12/7/01).

KIM further believes that any Investment Adviser is not fulfilling
their Fiduciary duty to their clients if they do not vote to open end CLM.

STATEMENT OF POSITION OF THE BOARD OF DIRECTORS IN OPPOSITION TO THE SHAREHOLDER
PROPOSAL
--------------------------------------------------------------------------------

The shareholder proposal asks that the Fund be converted to an
open-end fund in order to provide full Net Asset Value (NAV) to those
shareholders wishing to leave the Fund. All of the Directors believe that this
is not the most effective means to deliver long-term added value to a majority
of shareholders. The full Board opposes the proposal and believes that
open-ending should be rejected in favor of other means of maximizing shareholder
value within the closed-end structure. The Board believes that somewhat more
patience is justified in an attempt to reap potentially greater rewards. The
goal of this Board is not to pit one shareholder against another, but to
establish a balance that satisfies the greatest number of shareholders.

During the first quarter of 2001, the Fund substantially
under-performed the S&P 500 benchmark, which fell 12.1%. Following Cornerstone
Advisors' becoming the Fund's investment manager, after the end of the first
quarter of 2001, the benchmark continued to decline through the end of the year
as the U.S. entered a recession in March which was followed by the September
11th tragedy and its aftermath.

In spite of this challenging environment over the last three quarters
of 2001, the Fund's price appreciated 3.9% and the Fund's discount to NAV closed
to 12.5% by the end of the year. While nine months is not enough time for
effective evaluation, we believe our approach that includes repurchasing shares
at a discount, optimizing Fund expenses, and diversifying the Fund's portfolio
has and will continue to create significant added value for our shareholders.

Different types of investors have their own agendas and their own
beliefs. The closed-end structure is fundamentally different from an open-end
structure or one that provides NAV on demand. Attempts to deliver NAV
immediately to a minority of shareholders who wish to exit the Fund may well
destroy or diminish the advantages otherwise enjoyed by the remaining
shareholders. For the time being, the current Board is committed to realizing
the potential of the Fund without changing its fundamental nature.

The major benefits of the closed-end structure to long-term
shareholders are threefold: flexibility in managing fund assets, lower expenses,
and performance enhancement through profiting from the discount.

-53-

Flexibility in managing fund assets. Unlike open-end funds,
closed-end funds are not subject to cash flow disruptions caused by inflows or
outflows of capital when shareholders buy new shares or redeem shares. This
permits Fund management to take a more long-term perspective on investments and
may permit a more effective investment strategy. This may in turn produce higher
long-term portfolio returns. In addition, cash can be raised to take advantage
of anticipated market declines without fear that it will instead have to be used
to satisfy the shareholder redemptions in open-end funds that normally accompany
market reversals. Less liquid securities, such as other closed-end funds selling
at discounts, can be placed in the Fund's portfolio without fear that
redemptions will require untimely sales to raise capital.

Lower expenses. Because closed-end funds need not engage in many of
the shareholders services normally required of open-end funds and do not have
the same marketing and communication activities, costs can be kept to a minimum.
The current Directors have found many ways to reduce expenses and are pursuing
many more. The Board remains convinced that closed-end funds can be run more
cost effectively than open-end funds and that these savings, along with the
additional flexibility in managing Fund assets, may well permit substantial
additional returns to be realized over time as compared with equivalent open-end
funds.

Profiting from the discount. Closed-end funds often sell at
discounts, at least part of the time. A fund that purchases its own shares at a
discount benefits loyal, long-term shareholders in two ways. First, the net
asset value is automatically increased at no additional risk. Second, the supply
of shares available for sale at a discount is reduced and this creates price
pressure which is likely to reduce the discount and enhance share value. While
the extra liquidity may benefit shareholders who choose to sell their shares,
the greatest value of an ongoing buyback program accrues to long-term
shareholders. Shareholders who view the fund as a long-term, tax efficient
investment may be better off in a closed-end structure at a nominal or moderate
discount which fluctuates.

For all these reasons, the Board unanimously recommends that
stockholders vote AGAINST this stockholder proposal.

EFFECT OF PASSAGE OF THE PROPOSAL

This advisory Proposal requires the affirmative vote of a majority of
shares voting at the Meeting for passage. The Investment Company Act of 1940
requires that any conversion of a closed-end investment company to an open-end
investment company be by a vote of a majority of the Fund's outstanding voting
securities. The term "a majority of the Fund's outstanding voting securities" is
defined by the 1940 Act to mean the vote, at the annual or a special meeting of
the security holders of such company duly called (a) of 67 per centum or more of
the voting securities present at such meeting, if the holders of more than 50
per centum of the outstanding voting securities of such company are present or
represented by proxy; or (b) of more than 50 per centum of the outstanding
voting securities of such company, whichever is the less.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE AGAINST PROPOSAL NO. 4

-54-

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 Commission, under the Securities Act
and the Investment Company Act, to which reference is hereby made.
The Funds are 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 the Funds 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.

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 Meeting 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 Progressive Return Fund, Inc. and
Cornerstone Strategic Value Fund, Inc.

PROGRESSIVE RETURN FUND, INC.
Ralph W. Bradshaw
President, Progressive Return Fund, Inc.

CORNERSTONE STRATEGIC VALUE FUND, INC.

Ralph W. Bradshaw
President, Cornerstone Strategic Value Fund, Inc.

-55-

PROGRESSIVE RETURN 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 Progressive Return Fund, Inc. ("PGF") to be issued pursuant to an
Agreement and Plan of Merger, dated October __, 2002, between PGF and
Cornerstone Strategic Value Fund, Inc. ("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 September __,
2002. 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 SEPTEMBER __, 2002

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........................... 1

MANAGEMENT............................................................ 5

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS............................10

INVESTMENT MANAGEMENT AND OTHER SERVICES..............................10

PORTFOLIO TRANSACTIONS................................................12

TAX STATUS............................................................14

FINANCIAL STATEMENTS..................................................15

THE INFORMATION IN THIS SAI IS NOT COMPLETE AND MAY BE CHANGED. PGF 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 September __, 2002 (the "Proxy
Statement/Prospectus"). The Proxy Statement/Prospectus has been sent to the
stockholders of CLM in connection with the solicitation of proxies by the Board
of Directors to be voted at the CLM Annual Meeting of Stockholders and the PGF
Special Meeting of Stockholders both to be held on October __, 2002. This SAI
incorporates by reference the Prospectus of CLM dated as June 23, 1987,
and the Fund's Annual Report to Stockholders for the fiscal year ended December
31, 2001 and Semi-Annual Report to Stockholders for the period ended June 30,
2002.

DESCRIPTION OF THE FUND

Progressive Return Fund, Inc. (the "Fund" or "PGF") was incorporated
in Maryland on August 11, 1989, under its previous name "The Portugal Fund,
Inc.", and commenced investment operations on November 9, 1989. On December 15,
2000, the stockholders of the Fund changed the name of the Fund to Progressive
Return Fund, Inc. The Fund is registered under the Investment Company of 1940,
as amended (the "Investment Company Act"), as a closed-end, non-diversified
management investment company and is listed on the New York Stock Exchange
("NYSE") under the symbol "PGF." PGF seeks total return consisting of capital
appreciation and current income by investing primarily in U.S. and non-U.S.
securities.

The authorized capitalization of PGF consists of 100,000,000 shares
of common stock having $0.001 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 PGF represents an equal proportionate interest in the
assets and liabilities belonging to PGF with each other share of PGF and is
entitled to such dividends and distributions out of the income belonging to PGF
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.

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 total return consisting of capital appreciation
and current income 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.

INVESTMENT POLICIES AND RISKS

PRINCIPAL INVESTMENT POLICIES

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. The Fund is subject to the general risk that the value of the
Fund's investments may decline if the stock markets perform poorly. There is
also a risk that the Fund's investments will underperform either the securities
markets generally or particular segments of the securities markets.

CREDIT RISKS. Fixed income securities rated B or below by Standards &
Poors Corporation or Moody's Investor Service, Inc. may be purchased by the
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. The 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.

-2-

ILLIQUID SECURITIES. The 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 of 1933 will not be considered illiquid if
Cornerstone Advisors 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.

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.

-3-

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 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. Lend money to other persons except through the purchase of debt
obligations, loans or participation interests in loans and the entering into of
repurchase agreements or reverse repurchase agreements in the United States
consistent with the Fund's investment objective and policies.

4. Make short sales of securities or maintain a short position in any
security.

5. 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.

6. 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.

7. 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.

8. Make investments for the purpose of exercising control over, or
management of, the issuers of any securities.

-4-

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.

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

Term of
Office Directorships held by Director
Name, Address and Age Position(s) Since Principal Occupation during outside of the Fund Complex*
with Fund past 5 years

CLASS I DIRECTORS SERVING UNTIL THE YEAR 2004 ANNUAL MEETING OF STOCKHOLDERS.

Andrew A. Strauss (48) Director 2000 Attorney and senior member Director of The SmallCap Fund, Inc.,
77 Central Avenue of Strauss & Associates, Memorial Mission Hospital Foundation
Suite F P.A., Attorneys, Asheville and Deerfield Episcopal Retirement
Asheville, NC 28801 and Hendersonville, N.C.; Community.
previous President of White
Knight Healthcare, Inc. and
LMV Leasing, Inc., a wholly
owned subsidiary of Xerox
Credit Corporation.

-5-

CLASS II DIRECTORS SERVING UNTIL THE YEAR 2005 ANNUAL MEETING OF STOCKHOLDERS
Edwin Meese III (70) Director 2001 Distinguished Fellow, The
The Heritage Foundation Heritage Foundation,
214 Massachusetts Ave. NE Washington D.C.;
Washington D.C. 20002 Distinguished Visiting
Fellow at the Hoover
Institution, Stanford
University; Distinguished
Senior Fellow at the
Institute of United States
Studies, University of
London; and Formerly U.S.
Attorney General under
President Ronald Reagan.

Glenn W. Wilcox, Sr. (70) Director 2000 Chairman of the Board and Director of The SmallCap Fund, Inc.,
One West Pack Square Chief Executive Officer of Wachovia Corp.; Board Trustee and
Suite 1700 Wilcox Travel Agency. Chairman of Appalachian State
Asheville, NC 28801 University; Board Trustee and
Director, Mars Hill College;
Director, Champion Industries, Inc.;
Chairman, Tower Associates, Inc. (a
real estate venture).

------------
* As of January 2, 2002, the Fund Complex is comprised of PGF, CLM, The
Cornerstone Strategic Return Fund, Inc. and EIS Fund, Inc. all of which
are managed by Cornerstone Advisors, Inc. as of that date.
** Mr. Bradshaw is an "interested person" as defined in the Investment
Company Act of 1940 ("Investment Company Act") because he is a
director, officer and 50% shareholder in Cornerstone Advisors, Inc.,
the Fund's investment manager.

-6-

-7-

EXECUTIVE OFFICERS

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

Term of
Name, Address and Age Position(s) Office Principal Occupation during past 5 Directorships held by
with Fund Since years Officer

The Fund pays each of its Directors who is not a director, officer,
partner, co-partner or employee of Cornerstone Advisors or any affiliate thereof
a stipend of $6,000, a fee in the amount of $600 per Board Meeting personally
attended, and a fee of $100.00 per Board Meeting attended via telephone. In
addition, the Fund will reimburse those Directors for travel and out-of-pocket
expenses incurred in connection with Board of Directors meetings. The aggregate
remuneration paid to Directors by PGF during the fiscal year ended December 31,
2001 was $68,816.

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.

AUDIT COMMITTEE

The members of the Audit Committee of the Board of Directors are
Messrs. Lenagh, Strauss, Meese, Wilcox and Rogers. The Audit Committee oversees
the Fund's financial reporting process, reviews audit results and recommends
annually to the Fund a firm of independent certified public accountants. During
the fiscal year ended December 31, 2002, the Audit Committee held two meetings
in which all of the members of the Audit Committee attended.

-8-

NOMINATING COMMITTEE

At the Quarterly Meeting of the Board of Directors held on August 2,
2002, the Board of Directors established a Nominating Committee. The members of
the Nominating Committee of the Board of Directors are all Independent Directors
and are Messrs. Lenagh, Strauss, Meese, Wilcox and Rogers. The Nominating
Committee is responsible for seeking and reviewing candidates for consideration
as nominees for Trustees as is from time to time considered necessary or
appropriate. The Nominating Committee will consider nominees recommended by
stockholders of the Fund as long as the stockholders properly submit their
recommendations as required under the Fund's By-laws.

The Fund's Board of Directors, including the Directors who are not
interested persons of any party to the Cornerstone Agreement or its affiliates,
approved the Cornerstone Agreement for the Fund on February 9, 2001, 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 Board of Directors
considered the best interests of the stockholders and took into account factors
they deemed relevant. The factors considered by the independent Directors
included the nature, quality and scope of the operations and services to be
provided by Cornerstone Advisors, while focusing on the prior experience of
Cornerstone Advisors' principals with respect to: (i) the continuity of the
Fund's portfolio management due to the fact that Mr. Bradshaw will continue to
be the person responsible for the investment management of the Fund's portfolio
securities, despite the externalization of management; (ii) the structure of
closed-end investment companies in general; (iii) management of portfolios of
U.S. equity securities; (iv) implementing aggressive policies to eliminate
closed-end investment companies' discounts; and (v) implementing policies to cut
costs and expenses of closed-end investment companies. Furthermore, the Board of
Directors of the Fund considered the opportunity to obtain high quality services
at costs that it deemed appropriate and reasonable. The Board of Directors also
reflected upon the intention of Cornerstone Advisors to continue to act as the
investment manager to Cornerstone Strategic Value Fund, Inc. and The Cornerstone
Strategic Return Fund, Inc. (the "CFR"), thereby creating a family of closed-end
funds including but not necessarily limited to PGF, CRF and CLM. 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.

-9-

CODE OF ETHICS

The Fund and Cornerstone Advisers 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
Advisers' 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.

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS

Please refer to the Proxy Statement/Prospectus for information on this Item.

INVESTMENT MANAGEMENT AND OTHER SERVICES

INVESTMENT ADVISER.

Cornerstone Advisors, Inc. ("Cornerstone Advisors") is the investment
adviser of PGF pursuant to an investment advisory agreement.

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 Company Act. In
addition to PGF and CLM, Cornerstone Advisors is the investment adviser to two
other closed-end funds, The Cornerstone Strategic Return Fund, Inc. and EIS
Fund, Inc. (f/k/a Excelsior Income Shares, Inc.). Mr. Ralph W. Bradshaw, a
Director and President of PGF and CLM, serves as each Fund's portfolio manager.

Mr. Bradshaw and Mr. Gary A. Bentz, a Director of EIS Fund, Inc., are
the sole stockholders of Cornerstone Advisors. Messrs. Bradshaw and Bentz have
extensive experience with closed-end investment companies. Mr. Bradshaw, also
serves as a Director to The Smallcap Fund, Inc., EIS Fund, Inc. and The
Cornerstone Strategic Return Fund, and served as a Vice President of Deep
Discount Advisors, Inc. ("Deep Discount") from 1993 to 1999. Mr. Bentz, who
currently serves as a Director to EIS Fund, Inc. and is Treasurer and Vice
President of PGF, CLM and the two other funds for which Cornerstone Advisors
serves as investment adviser, was also affiliated with Deep Discount as its
Chief Financial Officer from 1993 to 2000. Messrs. Bradshaw and Bentz no longer
possess any ownership interest in Deep Discount nor do they provide any
investment advisory services to Deep Discount or its clients. Deep Discount and
Ron Olin Investment Management Company ("ROIMC"), both of which jointly filed a
Schedule 13G with the Securities and Exchange Commission (the "SEC") on
February 15, 2002 as beneficial owners of more than five (5%) percent of the
outstanding shares of each Fund, are registered investment advisers which, on
behalf of their respective advisory clients, invest in the common stock of
closed-end investment companies. There exists no arrangements or understandings
among Cornerstone Advisors, Deep Discount, ROIMC or any of their respective
stockholders with respect to the Funds.

-10-

Cornerstone Advisors has sole investment discretion for the Fund's
assets under the supervision of the Fund's Board of Directors and in accordance
with the Fund's stated policies. Cornerstone Advisors selects investments for
the Fund and places purchase and sale orders on behalf of the Fund.

Pursuant to the Cornerstone Agreement, Cornerstone Advisors conducts
investment research and supervision for the Fund and is responsible for the
purchase and sale of investment securities for the Fund's portfolio, subject to
the supervision and direction of the Board of Directors. Cornerstone Advisors
provides the Fund with investment advice, supervises the Fund's management and
investment programs and provides investment advisory facilities and executive
and supervisory personnel for managing the investments and effectuating
portfolio transactions. Cornerstone Advisors also furnishes, at its own expense,
all necessary administrative services, office space, equipment and clerical
personnel for servicing the investments of the Fund. In addition, Cornerstone
Advisors pays the salaries and fees of all officers of the Fund who are
affiliated with Cornerstone Advisors.

The Cornerstone Agreement provides that the Fund is responsible for
all of its expenses and liabilities, except that Cornerstone Advisors is
responsible for the expenses in connection with maintaining a staff within its
organization to furnish the above services to the Fund. The Fund pays
Cornerstone Advisors monthly an annual fee of one (1.00%) percent of the Fund's
average weekly net assets for the investment management and research services
provided by Cornerstone Advisors. Additionally, Cornerstone Advisors has
voluntarily agreed to limit the Fund's annual operating expenses (excluding
interest, taxes, brokerage commissions, expenditures which are capitalized in
accordance with generally accepted accounting principles, and other
extraordinary expenses not incurred in the ordinary course of the Fund's
business) to one and twenty one-hundredths (1.20%) percent (on an annualized
basis) of the Fund's average net assets for the fiscal period from July 1, 2002
through December 31, 2002.

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.

-11-

BSFM provides office facilities and personnel adequate to perform the
following services for the Fund: 1) oversight of the determination and
publication of the Fund's net asset value in accordance with the Fund's policy
as adopted from time to time by the Board of Directors; 2) maintenance of the
books and records of the Fund as required under the Investment Company Act; 3)
preparation of the Fund's U.S. federal, state and local income tax returns; 4)
preparation of financial information for each Fund's proxy statements and
semi-annual and annual reports to Stockholders; and 5) preparation of certain of
the Fund's reports to the SEC.

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
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.

-12-

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 PGF in brokerage commissions for the
fiscal years ended December 31, 1999, 2000 and 2001 were $___________,
$______________ and $___________________, respectively. None of the brokerage
commissions paid by PGF were paid to affiliated brokers.

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

PGF 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 Program Administrator for the
stockholders in administering the Program.

Stockholders who have shares registered directly in their own names
automatically participate in the 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, the Fund's respective dividends and other distributions to
stockholders are reinvested in full and fractional shares as described below.

When the Fund declares an income dividend or a capital gain or other
distribution (each, a "Dividend" and collectively, "Dividends"), the Agent, on
the stockholders behalf, will (i) receive additional authorized shares from the
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 NYSE or elsewhere, with cash allocated to it by the Fund ("Open
Market Purchases").

-13-

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 Fund over the five trading days preceding the payment date of such dividend.

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

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.

-14-

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
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.

-15-

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.

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.

-16-

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.

FINANCIAL STATEMENTS

(a) The Financial Statements required under this Item are incorporated by
reference herein from the

1. Progressive Return Fund, Inc.'s Annual Report for the period ended
December 31, 2000, filed with the Securities and Exchange Commission
on March 1, 2001 (File No. 811-5891).

2. Progressive Return Fund, Inc.'s Annual Report for the period ended
December 31, 2001, as filed with the Securities and Exchange
Commission on March 6, 2002 (File No. 811-5891)

3. Progressive Return Fund, Inc.'s Semi-Annual Report for the period
ended June 30, 2002, as filed with the Securities and Exchange
Commission on August __, 2002 (File No. 811-5891).

4. Cornerstone Strategic Value Fund, Inc. Annual Report for the period
ended December 31, 2000, filed with the Securities and Exchange
Commission on March 1, 2001 (File No. 811-5150).

5. 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).

6. Cornerstone Strategic Value Fund, Inc. Semi-Annual Report for the
period ended June 30, 2002, filed with the Securities and Exchange
Commission on August __ (File No. 811-5150).

(b) Pro Forma Financial Information

The following table represents the pro forma financial information
based upon the June 30, 2002 unaudited financial statements that are included in
each Fund's Semi-Annual Report to Stockholders.

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001(UNAUDITED)
PGF ACQUIRING FUND
ACQUIRING FUND CLM ADJUSTMENTS PRO FORMA
-------------- --- ----------- ---------
INVESTMENT INCOME
Income:

Dividends 642,453 402,428 -- $ 1,044,881
Interest 132,919 30,952 -- 163,871
Less: Foreign taxes witheld (3,483) (2,087) -- (5,570)
---------- ----------- ------- -----------

Total Investment Income 771,889 431,293 -- 1,203,182
---------- ----------- ------- -----------

Expenses:
Investment advisory fees 331,733 381,800 158,269 (c) 871,802 (c)
Audit fees 35,900 39,283 (62,183)(d) 13,000
Legal fees 86,660 93,887 (97,080)(d) 83,467
Administration fees 58,976 61,354 (33,150)(e) 87,180
Custodian fees 30,124 21,647 (39,709)(f) 12,062
Printing 54,029 58,270 (67,299)(d) 45,000
Accounting fees 43,425 20,154 (31,446)(g) 32,133
Directors' fees 86,809 70,047 (105,856)(d) 51,000
Transfer agent fees 25,015 7,880 (8,895)(d) 24,000
NYSE listing fees 23,873 25,000 (23,873)(d) 25,000
Insurance 15,558 9,187 (4,745)(d) 20,000
Other 17,061 15,397 (19,958)(d) 12,500
---------- ----------- ------- -----------
Total Expenses 809,163 803,906 (335,925) 1,277,144
---------- ----------- ------- -----------
Less: Fee paid indirectly (42,694) (75,381) (118,075)
Less: Fee waivers (1,966) (73,434) -- (75,400)
---------- ----------- ------- -----------
Net Expenses 764,503 655,091 (335,925) 1,083,669
---------- ----------- ------- -----------

Net Investment Income 7,386 (223,798) 335,925 119,513
---------- ----------- ------- -----------

NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY RELATED TRANSACTION
Net realized loss from Investments (4,384,728) (12,881,037) (17,265,765)
Net change in unrealized appreciation/(depreciation) in
value of investments and translation of other assets
and liabilities denominated in foreign currencies (2,439,912) 2,927,931 488,019
---------- ----------- ------- -----------

Net realized and unrealized gain/(loss) on investments
and foreign currency related transaction (6,824,640) (9,953,106) (16,777,746)
---------- ----------- ------- -----------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS (6,817,254) (10,176,904) 335,925 (16,658,233)
---------- ----------- ------- -----------

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

STATEMENT OF ASSETS AND LIABILITIES
AT DECEMBER 31, 2001 (UNAUDITED)

PGF ACQUIRING FUND CLM ACQUIRING FUND PRO FORMA
ASSETS COST VALUE COST VALUE ADJUSTMENTS COST VALUE
------ ---- ----- ---- ----- ----------- ---- -----

Investments, at value 48,089,664 46,170,268 30,367,906 35,357,166 81,527,434
Cash collateral received for securities
loaned 755,986 138,721 894,707
Receivables:
Dividends 44,217 27,773 71,990
Interest 778 307 1,085
Prepaid expenses and other assets 1,211 2,955 (2,955) (a) 1,21
----------- ----------- ----------
Total Assets 46,972,460 35,526,922 82,496,427
----------- ----------- ----------

LIABILITIES
Payables:
Disrtibution to shareholders 4,228,516 - 4,228,516
Upon return of securities loaned 755,986 138,721 894,707
Investment advisory fee 48,601 24,718 73,319
Capital Shares repurchased - 12,824 12,824
Other accrued expenses 91,915 94,607 186,522
----------- ----------- ----------
Total Liabilities 5,125,018 270,870 5,395,888
----------- ----------- ----------
Net Assets 41,847,442 35,256,052 77,100,539
----------- ----------- ----------

Net Assets Consist Of:

Capital stock, $0.001 par value;
4,228,516 shares issued and
outstanding for PGF (100,000,000
shares authorized) and $0.01 par
value; 3,832,560 shares issued and
outstanding for CLM (25,000,000
shares authorized) 4,229 38,326 42,555
Paid-in-capital 62,101,955 57,277,113 (26,579,917)(b) 92,799,151
Cost of 203,900 and 2,177,440 shares
repurchased, respectively (1,947,040) (26,579,917) 26,579,917 (b) (1,947,040)
Distribution in excess of net
investment income (4,221,130) - (2,955)(a) (4,224,085)
Accumulated net realized loss
on investments (12,171,176) (468,730) (12,639,906)
Net unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies (1,919,396) 4,989,260 3,069,864
----------- ----------- ----------
41,847,442 35,256,052 77,100,539
----------- ----------- ----------

PROGRESSIVE RETURN FUND, INC.
THE CORNERSTONE STRATEGIC VALUE, 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 CLM to PGF in exchange for PGF common shares, the distribution of such PGF
common shares to common shareholders of CLM and the subsequent liquidation of
CLM. Each share of common stock of CLM will convert into an equivalent dollar
amount of full shares of common stock of EIS 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.

PGF and CLM are both 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
PGF and CLM.

(a) To remove certain prepaid expenses associated with CLM, in the statement of
assets and liabilities, which will not be assumed by PGF.

(b) In connection with CLM's intention to merge with PGF; CLM 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) Adjustment based on the contractual agreement with the Accounting fees for
the combined Fund.

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 ccounting 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. .

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.

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 PGF as now in effect

(2) Amended and Restated By-Laws as of February 13, 2002 of the Registrant

(3) Not Applicable

(4) Copy of 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).

(5) Not Applicable

(6) Copy of the Investment Management Agreement dated as of April 19, 2001
between Cornerstone Advisors, Inc. and PGF - incorporated herein by reference to
Exhibit 4 to PGF'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) Custody Agreement -

(10) Not Applicable

(11) Opinion and consent of Counsel regarding legality of securities being
registered.

(12) Opinion and consent of Counsel regarding certain tax matters and
consequences to shareholders.

(13) Not Applicable

(14) Consent of Independent Auditors

(15) Not Applicable

(16) Not Applicable

(17) Not Applicable

C-1

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 2nd day of August, 2002.

PROGRESSIVE RETURN FUND, INC.

By: /S/ RALPH W. BRADSHAW
----------------------------------
Name: Ralph Bradshaw
Title: President

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 STRAUSS /S/ THOMAS LENAGH
------------------------------- -----------------------------
Andrew A. Strauss, Director Thomas H. Lenagh, Director

/S/ SCOTT 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-2

EXHIBIT A

MERGER AGREEMENT AND PLAN OF REORGANIZATION

THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made as of this ____ day of October, 2002, between Cornerstone Strategic Value
Fund, Inc. (the "Target Fund" or "CLM"), a Maryland corporation and a registered
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and Progressive Return Fund, Inc. (the "Acquiring Fund" or "PGF"),
a Maryland corporation and a registered investment company under the 1940 Act.

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)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").

NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the Parties hereto 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"). PGF shall be the surviving
investment company. CLM shall cease to exist as a separate investment company.

Each share of CLM will be converted into an equivalent dollar amount
(to the nearest one ten-thousandth of one cent) of shares of Common Stock of
PGF, with a par value of $0.001 per share, based on the net asset value per
share of each of the Parties at 4:00 p.m. Eastern Time on the business day prior
to the Effective Date (the "Valuation Time"). Fractional shares of PGF will be
issued to CLM shareholders. The Effective Date and the business day prior to it
must each be a day on which the NYSE is open for trading (a "Business Day").

From and after the Effective Date, the Acquiring Company shall
possess all of the properties, assets, rights, privileges, powers and shall be
subject to all of the restrictions, liabilities, obligations, disabilities and
duties of CLM, all as provided under Maryland law.

2.2. ACTIONS AT CLOSING. At the closing of the transactions
contemplated by this Agreement (the "Closing") on the date thereof (the "Closing
Date"), (i) CLM will deliver to PGF the various certificates and documents
referred to in Article 7 below, (ii) PGF will deliver to CLM the various
certificates and documents referred to in Article 8 below, and (iii) CLM and PGF
will file jointly 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.

A-1

2.3. EFFECT OF MERGER. Subject to the requisite approvals of the
shareholders of the Parties, 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 CLM shall cease. As promptly as practicable after the Merger, CLM
shall delist its shares from the NYSE and its registration under the 1940 Act
shall be terminated. Any reporting responsibility of CLM is, and shall remain,
the responsibility of CLM up to and including the Effective Date.

3. REPRESENTATIONS AND WARRANTIES OF CLM

CLM represents and warrants to PGF 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. CLM represents and warrants to,
and agrees with, PGF that:

3.1. 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.

3.2. 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 regulated investment companies ("RIC") 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.

3.3. 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 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. CLM is not, and the execution, delivery and
performance of this Agreement by CLM 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
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.

3.5. FINANCIAL STATEMENTS. PGF has been furnished with CLM's Annual
Report of Stockholders, as of December 31, 2001, said financial statements
having been examined by PricewaterhouseCoopers LLP, 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 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.

PGF has also been furnished with CLM's Semi-Annual Report to
Stockholders dated as of June 30, 2001. This financial statement and the
schedule of investments 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.

A-2

3.6. This Section has been left intentionally Blank.

3.7. 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.

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 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.

3.9. 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 (as defined in Section 3.13 below) or will not be otherwise disclosed
to PGF prior to the Effective Date.

3.10. UNDISCLOSED LIABILITIES. 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 in accordance 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, 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 3.10, 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.

3.11. TAX FILINGS. All federal and other tax returns and information
reports of CLM required by law to have been filed shall have been filed and are
or will be correct in all material respects, and all federal and other taxes
shown as due or required to be shown as due on said returns and reports shall
have been paid or provision shall have been made for the payment thereof, and,
to the best of CLM's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns. All tax liabilities
of CLM have been adequately provided for on its books, and no tax deficiency or
liability of CLM has been asserted and no question with respect thereto has been
raised by the Internal Revenue Service or by any state or local tax authority
for taxes in excess of those already paid, up to and including the taxable year
in which the Effective Date occurs.

3.12. QUALIFICATION UNDER SUBCHAPTER M. For each taxable year of its
operation (including the taxable year ending on the Effective Date), 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.

A-3

3.13. FORM N-14.The registration statement to be filed by PGF on Form
N-14 relating to PGF 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 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 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 PGF for use in the
N-14 Registration Statement.

3.14. 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 as provided in
Section 6.7. 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.

(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.

3.15. 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.

4. REPRESENTATIONS AND WARRANTIES OF PGF

PGF represents and warrants to CLM 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. PGF represents and warrants to,
and agrees with, CLM that:

4.1. 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.

4.2. 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 RICs 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.

A-4

4.3. 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 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. PGF is not, and the execution, delivery and
performance of this Agreement by PGF will not result, in 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.

4.5. FINANCIAL STATEMENTS. CLM has been furnished with PGF's Annual
Report to Stockholders as of December 31, 2002, said financial statements having
been examined by PricewaterhouseCoopers LLP, independent public auditors. These
financial statements are in accordance with 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.

CLM has been furnished with PGF's Semi-Annual Report to Stockholders
dated as of June 30, 2002. This financial statement and schedule of investments
are in accordance with 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.

4.6. This Section has been intentionally left blank.

4.7. 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.

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 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.

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4.9. 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 or will not be otherwise disclosed to CLM prior to the Effective Date.

4.10. UNDISCLOSED LIABILITIES. Since entering into this Agreement,
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
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 since 1989, 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 4.10, 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.

4.11. TAX FILINGS. All federal and other tax returns and information
reports of PGF required by law to have been filed shall have been filed and are
or will be correct in all material respects, and all federal and other taxes
shown as due or required to be shown as due on said returns and reports shall
have been paid or provision shall have been made for the payment thereof, and,
to the best of PGF's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns. All tax liabilities
of PGF have been adequately provided for on its books, and no tax deficiency or
liability of PGF has been asserted and no question with respect thereto has been
raised by the Internal Revenue Service or by any state or local tax authority
for taxes in excess of those already paid, up to and including the taxable year
in which the Effective Date occurs.

4.12. QUALIFICATION UNDER SUBCHAPTER M. For each taxable year of its
operation, PGF 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 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 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 CLM for use in the
N-14 Registration Statement.

4.14. 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. 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.

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(b) PGF is authorized to issue 100,000,000 shares of stock, par value
$0.001 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, PGF will have obtained any and
all regulatory, director and shareholder approvals necessary to issue PGF common
stock.

4.16. 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.

5. CONVERSION TO PGF COMMON STOCK

5.1. CONVERSION.
------------
(a) Subject to the requisite approval of the shareholders of the
parties, and the other terms and conditions contained herein, at the Effective
Date, each share of common stock of CLM will be converted into an equivalent
dollar amount (to the nearest one ten-thousandth of one cent) of shares of PGF
common stock, computed based on the net asset value per share of each of the
parties at the Valuation Time.

(b) Fractional shares of PGF will be issued to CLM shareholders.

5.2. COMPUTATION OF NET ASSET VALUE. The net asset value per share of
the Parties 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 parties to
take into account differences in realized and unrealized gains and losses. The
value of the assets of CLM to be transferred to PGF shall be determined by PGF
pursuant to the principles and procedures consistently utilized by PGF 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 CLM when valuing its own assets and determining its own liabilities.
Such valuation and determination shall be made by PGF in cooperation with CLM
and shall be confirmed in writing by PGF to CLM. The net asset value per share
of PGF common stock shall be determined in accordance with such procedures, and
PGF shall certify the computations involved.

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

5.4. SURRENDER OF CLM STOCK CERTIFICATES. With respect to any CLM
shareholder holding certificates representing shares of the common stock of CLM
as of the Effective Date, and subject to PGF being informed thereof in writing
by CLM, PGF will not permit such shareholder to receive new certificates
evidencing ownership of PGF common stock until such shareholder has surrendered
his or her outstanding certificates evidencing ownership of the common stock of
CLM or, in the event of lost certificates, posted adequate bond. CLM will
request its shareholders to surrender their outstanding certificates
representing certificates of the common stock of CLM or post adequate bond
therefor. Dividends payable to holders of record of shares of PGF as of any date
after the Effective Date and prior to the exchange of certificates by any
shareholder of CLM 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 CLM for exchange.

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6. COVENANTS OF THE PARTIES

6.1. SHAREHOLDERS' MEETINGS.

(a) Each of the parties 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 October __, 2002, and any
adjournments thereof.

(b) Each of the Parties 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 and
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 CLM, 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 Parties 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) CLM 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 CLM has ceased to be a RIC.

(b) PGF 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. CLM agrees to cooperate fully with PGF,
and will furnish to PGF 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.

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

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6.6. TAX MATTERS. Each of the Parties agrees that by the Effective
Date all of its federal and other tax returns and reports required to be filed
on or before such date shall have been filed and all taxes shown as due on said
returns either have been paid or adequate liability reserves have been provided
for the payment of such taxes. In connection with this covenant, the Parties
agree to cooperate with each other in filing any tax return, amended return or
claim for refund, determining a liability for taxes or a right to a refund of
taxes or participating in or conducting any audit or other proceeding in respect
of taxes. PGF agrees to retain for a period of ten (10) years following the
Effective Date all returns, schedules and work papers and all material records
or other documents relating to tax matters of CLM for its final taxable year and
for all prior taxable periods. Any information obtained under this Section 6.6
shall be kept confidential except as otherwise may be necessary in connection
with the filing of returns or claims for refund or in conducting an audit or
other proceeding. After the Effective Date, PGF shall prepare, or cause its
agents to prepare, any federal, state or local tax returns, including any Forms
1099, required to be filed and provided to required persons by CLM with respect
to its final taxable years ending with the Effective Date and for any prior
periods or taxable years for which the due date for such return has not passed
as of the Effective Date and further shall cause such tax returns and Forms 1099
to be duly filed with the appropriate taxing authorities and provided to
required persons. Notwithstanding the aforementioned provisions of this Section
6.6, any expenses incurred by PGF (other than for payment of taxes) in excess of
any accrual for such expenses by CLM in connection with the preparation and
filing of said tax returns and Forms 1099 after the Effective Date shall be
borne by PGF.

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

6.8. DELISTING, TERMINATION OF REGISTRATION AS AN INVESTMENT COMPANY.
CLM agrees that the (i) delisting of the shares of CLM with 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 PGF

The obligations of PGF 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 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 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.

7.2. 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 Dates, 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.

A-9

(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 federal, state and local income tax returns for the period ended
December 31, 2001, and that based on such limited review, nothing came to their
attention which caused them to believe that such returns did not properly
reflect, in all material respects, the federal, state and local income taxes of
CLM for the period covered thereby; and that for the period from December 31,
2001 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 federal, state and local 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
federal, state and local taxes for the period from December 31, 2001, to and
including the Effective Date and for any taxable year ending upon the Effective
Date or that CLM 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) PGF shall have received an opinion of ______________, as counsel
to CLM, in form and substance reasonably satisfactory to PGF and dated the
Effective Date, to the effect that (i) CLM is a corporation duly organized,
validly existing under the laws of the State of Maryland and in good standing
with the Department; (ii) the Agreement has been duly authorized, executed and
delivered by CLM, and, assuming that the N-14 Registration Statement complies
with the 1933 Act, 1934 Act and the 1940 Act, constitutes a valid and legally
binding obligation of CLM, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws pertaining to the enforcement of creditors' rights generally and by
equitable principles; (iii) to the best of such counsel's knowledge, no consent,
approval, authorization or order of any United States federal or Maryland state
court or governmental authority is required for the consummation by CLM of the
Merger, except such as may be required under the 1933 Act, the 1934 Act, the
1940 Act, the published rules and regulations of the SEC thereunder and under
Maryland law and such as may be required by state securities or blue sky laws;
(iv) such counsel does not know of any contracts or other documents with respect
to CLM related to the Merger of a character required to be described in the N-14
Registration Statement which are not described therein or, if required to be
filed, filed as required; (v) the execution and delivery of this Agreement does
not, and the consummation of the Merger will not, violate any material provision
of the Articles of Incorporation, as amended, the by-laws, as amended, or any
agreement (known to such counsel) to which CLM is a party or by which CLM is
bound, except insofar as the parties have agreed to amend such provision as a
condition precedent to the Merger; (vi) to the best of such counsel's knowledge,
no material suit, action or legal or administrative proceeding is pending or
threatened against CLM; and (vii) all corporate actions required to be taken by
CLM to authorize this Agreement and to effect the Merger have been duly
authorized by all necessary corporate actions on behalf of CLM. Such opinion
shall also state that (A) while such counsel cannot make any representation as
to the accuracy or completeness of statements of fact in the N-14 Registration
Statement or any amendment or supplement thereto with respect to CLM, nothing
has come to their attention that would lead them to believe that, on the
respective effective dates of the N-14 Registration Statement and any amendment
or supplement thereto with respect to CLM, (1) the N-14 Registration Statement
or any amendment or supplement thereto contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading with respect
to CLM, and (2) the prospectus included in the N-14 Registration Statement
contained any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading with respect to CLM;
provided that such counsel need not express any opinion or belief as to the
financial statements, other financial data, statistical data or information
relating to the CLM contained or incorporated by reference in the N-14
Registration Statement. In giving the opinion set forth above, _______________
may state that it is relying on certificates of officers of CLM with regard to
matters of fact and certain certificates and written statements of governmental
officials with respect to the good standing of CLM and on the opinion of
______________, as to matters of Maryland law.

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(b) PGF shall have received an opinion from Spitzer & Feldman P.C.,
as counsel to PGF, dated the Effective Date, to the effect that for federal
income tax purposes (i) the Merger as provided in this Agreement will constitute
a reorganization within the meaning of Section 368(a)(1)(A) of the Code and that
PGF and CLM will each be deemed a "party" to a reorganization within the meaning
of Section 368(b) of the Code; (ii) no gain or loss will be recognized to CLM as
a result of the Merger or the conversion of CLM shares to PGF common stock;
(iii) no gain or loss will be recognized to PGF as a result of the Merger; (iv)
in accordance with Section 354(a)(1) of the Code, no gain or loss will be
recognized to the shareholders of CLM on the conversion of their shares into PGF
common stock; (v) the tax basis of CLM assets in the hands of PGF will be the
same as the tax basis of such assets in the hands of CLM prior to the
consummation of the Merger; (vi) immediately after the Merger, the tax basis of
PGF common stock received by the shareholders of CLM in the Merger will be
equal, in the aggregate, to the tax basis of the shares of CLM converted
pursuant to the Merger; (vii) a shareholder's holding period for PGF common
stock will be determined by including the period for which he or she held the
common stock of CLM converted pursuant to the Merger, provided that such CLM
shares were held as a capital asset; and (viii) PGF's holding period with
respect to CLM assets transferred will include the period for which such assets
were held by CLM.

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

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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 CLM or would prohibit the Merger.

7.10. SATISFACTION OF PROGRESSIVE RETURN FUND, INC. 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.

7.11. 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.

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

7.13. BOOKS AND RECORDS. CLM's transfer agent shall have provided to
PGF (i) the originals or true copies of all of the records of CLM in the
possession of such transfer agent as of the Exchange Date, (ii) a certificate
setting forth the number of shares of CLM 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 CLM

The obligations of CLM 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 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 that 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.

8.2. 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.

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(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 federal, state and local income tax returns for the period ended
December 31, 2001, and that based on such limited review, nothing came to their
attention which caused them to believe that such returns did not properly
reflect, in all material respects, the federal, state and local income taxes of
PGF for the period covered thereby; and that for the period from December 31,
2001 to and including the Effective Date, such firm has performed a limited
review to ascertain the amount of such applicable federal, state and local
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 federal, state and local taxes for the period from December 31,
2001, to and including the Effective Date or that PGF 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) CLM shall have received an opinion of ____________, as counsel to
PGF, in form and substance reasonably satisfactory to CLM and dated the
Effective Date, to the effect that (i) PGF is a corporation duly organized,
validly existing under the laws of the State of Maryland and in good standing
with the Department; (ii) the Agreement has been duly authorized, executed and
delivered by PGF, and, assuming that the N-14 Registration Statement complies
with the 1933 Act, 1934 Act and the 1940 Act, constitutes a valid and legally
binding obligation of PGF, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws pertaining to the enforcement of creditors' rights generally and by
equitable principles; (iii) to the best of such counsel's knowledge, no consent,
approval, authorization or order of any United States federal or Maryland state
court or governmental authority is required for the consummation by PGF of the
Merger, except such as may be required under the 1933 Act, the 1934 Act, the
1940 Act and the published rules and regulations of the SEC thereunder and under
Maryland law and such as may be required under state securities or blue sky
laws; (iv) the N-14 Registration Statement has become effective under the 1933
Act, no stop order suspending the effectiveness of the N-14 Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the 1933 Act, and, with respect
to PGF, the N-14 Registration Statement, and each amendment or supplement
thereto, as of their respective effective dates, appear on their face to be
appropriately responsive in all material respects to the requirements of the
1933 Act, the 1934 Act and the 1940 Act and the published rules and regulations
of the SEC thereunder; (v) such counsel does not know of any statutes, legal or
governmental proceedings or contracts with respect to PGF or other documents
related to the Merger of a character required to be described in the N-14
Registration Statement which are not described therein or, if required to be
filed, filed as required; (vi) the execution and delivery of this Agreement does
not, and the consummation of the Merger will not, violate any material provision
of the Articles of Incorporation, as amended, the by-laws, as amended, or any
agreement (known to such counsel) to which PGF is a party or by which PGF is
bound, except insofar as the parties have agreed to amend such provision as a
condition precedent to the Merger; (vii) to the best of such counsel's
knowledge, no material suit, action or legal or administrative proceeding is
pending or threatened against PGF; and (viii) all corporate actions required to
be taken by PGF to authorize this Agreement and to effect the Merger have been
duly authorized by all necessary corporate actions on behalf of PGF. Such
opinion shall also state that (A) while such counsel cannot make any
representation as to the accuracy or completeness of statements of fact in the
N-14 Registration Statement or any amendment or supplement thereto with respect
to PGF, nothing has come to their attention that would lead them to believe
that, on the respective effective dates of the N-14 Registration Statement and
any amendment or supplement thereto, (1) the N-14 Registration Statement or any
amendment or supplement thereto contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading with respect to PGF; and
(2) the prospectus included in the N-14 Registration Statement contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading with respect to PGF; provided that
such counsel need not express any opinion or belief as to the financial
statements, other financial data, statistical data or information relating to
PGF contained or incorporated by reference in the N-14 Registration Statement.
In giving the opinion set forth above, __________________ may state that it is
relying on certificates of officers of PGF with regard to matters of fact and
certain certificates and written statements of governmental officials with
respect to the good standing of PGF and on the opinion of _________________ as
to matters of Maryland law.

A-13

(b) CLM shall have received an opinion from Spitzer & Feldman P.C.
and dated the Effective Date, to the effect that for federal income tax purposes
(i) the Merger as provided in this Agreement will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the Code and that PGF and CLM will
each be deemed a "party" to a reorganization within the meaning of Section
368(b) of the Code; (ii) no gain or loss will be recognized to CLM as a result
of the Merger or on the conversion of CLM shares to PGF common stock; (iii) no
gain or loss will be recognized to PGF as a result of the Merger; (iv) no gain
or loss will be recognized to the shareholders of CLM on the conversion of their
shares into PGF common stock; (v) the tax basis of CLM assets in the hands of
PGF will be the same as the tax basis of such assets in the hands of CLM prior
to the consummation of the Merger; (vi) immediately after the Merger, the tax
basis of PGF common stock received by the shareholders of CLM in the Merger will
be equal, in the aggregate, to the tax basis of the shares of CLM converted
pursuant to the Merger; (vii) a shareholder's holding period for PGF common
stock will be determined by including the period for which he or she held the
common stock of CLM converted pursuant to the Merger, provided, that such CLM
shares were held as a capital asset; and (viii) PGF's holding period with
respect to CLM assets transferred will include the period for which such assets
were held by CLM.

8.5. 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 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 CLM, contemplated by the SEC.

A-14

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 CLM or would prohibit the Merger.

(c) PGF 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 CLM. 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.

8.9. 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.

9. PAYMENT OF EXPENSES

9.1. ALLOCATION. All expenses incurred in connection with the Merger
shall be allocated equally between PGF and CLM in the event the Merger is
consummated. 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 Parties owes any broker's or finder's fees in connection with the
transactions provided for herein.

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 of the Parties 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). CLM acknowledges and agrees
that from and after the Effective Date, PGF shall be entitled to possession of
all documents, books, records, agreements and financial data of any sort
pertaining to CLM.

11. INDEMNIFICATION

11.1. 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,
damages, 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.

A-15

11.2. 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,
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.

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 of the Parties) prior to the
Effective Date, or the Effective Date may be postponed by: (i) mutual agreement
of the Parties' Board of Directors; (ii) 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; or (iii) 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.

(b) If the transaction contemplated by this Agreement shall not have
been consummated by December 31, 2002, this Agreement automatically shall
terminate on that date, unless a later date is mutually agreed to by the Boards
of Directors of the Parties.

(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 of the
parties or their respective 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 CLM or PGF (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.

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 of the Parties 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 the
Parties 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.

A-16

(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 the
parties 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
the parties, unless such terms and conditions shall result in a change in the
method of computing the number of shares of PGF 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 parties prior to the meetings at which the Merger shall have
been approved, this Agreement shall not be consummated and shall terminate
unless the parties 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), PGF 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 PGF's transfer
agent with respect to such shares. CLM will provide PGF on the Effective Date
with the name of any CLM Shareholder who is to the knowledge of CLM 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
of the parties, 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

With copies to:
Thomas R. Westle, Esq.
Spitzer & Feldman P.C.
405 Park Avenue, 6th Floor
New York, New York 10022

A-17

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.
Spitzer & Feldman P.C.
405 Park Avenue, 6th Floor
New York, New York 10022

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 Parties 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 CLM and PGF; provided, however, that following the
meeting of CLM and PGF shareholders to approve the Merger, no such amendment may
have the effect of changing the provisions for determining the number of PGF
shares to be issued to CLM 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 the parties hereto and their 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 the parties hereto and
the shareholders of the Parties and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement.

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.

A-18

IN WITNESS WHEREOF, each of the Parties hereto has caused this
Agreement to be executed by its President or Vice President.

PROGRESSIVE RETURN FUND, INC.

By:________________________________
Name: Ralph Bradshaw
Title: President

CORNERSTONE STRATEGIC VALUE FUND, INC.

By:________________________________
Name: Ralph Bradshaw
Title: President

A-19

EXHIBIT B-1

PROXY CARD
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 Special Meeting of Stockholders of the
Fund to be held on _______, October __, 2002 at ____ a.m., New York time, at the
offices of Bear Stearns Funds Management Inc., 383 Madison Avenue, 23rd Floor,
Conference Room __, 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 approval of the plan of merger; (b) the
amendment to the Articles of Incorporation; and (c) the consideration and vote
of such other matters as may properly come before the Special Meeting of
Stockholders or any adjournment thereof. If no such specification is made, the
undersigned will vote FOR each of the proposals set forth above, and in their
discretion with respect to such other matters as may properly come before the
Special Meeting of Stockholders.

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

THIS PROXY IS SOLICITED ON BEHALF OF PROGRESSIVE RETURN FUND, INC.'S
BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON

OCTOBER __, 2002

(To be dated and signed on reverse side)

B1-1

Please mark boxes / / or /X/ in blue or black ink.

PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE:

---------

X
---------

--------------------------------------------------------------------------------
1. To approve the Merger Agreement and Plan of Reorganization:

FOR WITHHELD
[ ] [ ]

2. In the event that Proposal 1 is approved, then to amend the
Certificate of Incorporation to change the name of the Fund from
"Progressive Return Fund, Inc." to "Progressive Total Return Fund,
Inc.:

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

In their discretion, the proxies are authorized to consider and vote upon
such matters as may properly come before said Meeting or any adjournment
thereof.

B1-2

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE STOCKHOLDER. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED IN
FAVOR OF EACH PROPOSAL.

Your proxy is important to assure a quorum at the Special 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 Special 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.

B1-3

EXHIBIT B-2

PROXY CARD

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 ___________, October __, 2002 at ___ 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 CRF with and into Progressive
Return Fund, Inc.; (b) the election of two Class I Directors; (c) the
ratification of the selection by the Board of Directors of the Fund's
independent accountants; (d) the consideration and vote on the stockholder
proposal to open-end the Fund; and (e) the consideration and vote of such other
matters as may properly come before the Annual Meeting of Stockholders or any
adjournment thereof. If no such specification is made, the undersigned will vote
FOR proposals 1, 2 and 3 set forth above, vote AGAINST proposal 4, and will vote
in their discretion with respect to such other matters as may properly come
before the Annual Meeting of Stockholders.

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

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

October __, 2002

(To be dated and signed on reverse side)

B2-1

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 Progressive
Return Fund, Inc.:

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

In the event that Proposal 1 is not approved by the stockholders of CLM,
then the CLM Stockholders will be asked to vote on the following:

2. To elect two (2) Class I Directors: FOR WITHHELD
Edwin Meese III [ ] [ ]

Ralph W. Bradshaw [ ] [ ]

3. To ratify the selection by the Board of Directors of Tait, Weller &
Baker as the Fund's independent accountants for the year ending
December 31, 2002:

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

4. To consider and vote upon the stockholder proposal to open-end the
Fund:

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

In their discretion, the proxies are authorized to consider and vote upon
such matters as may properly come before said Meeting or any adjournment
thereof.

B2-2

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___________________

B2-3