CORNERSTONE STRATEGIC VALUE FUND, INC.
                     c/o Bear Stearns Funds Management, Inc.
                               383 Madison Avenue
                            New York, New York 10179
                                   May 7, 2004
Dear Stockholder:

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

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

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

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

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

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

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

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

                                            Respectfully,

                                            Ralph W. Bradshaw
                                            Chairman of the Board of Directors

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














                          PROGRESSIVE RETURN FUND, INC.
                     c/o Bear Stearns Funds Management Inc.
                               383 Madison Avenue
                            New York, New York 10179
                                   May 7, 2004


Dear Stockholder:

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

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

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

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

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

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

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

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

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

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















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



                                             Respectfully,

                                             Ralph W. Bradshaw
                                             Chairman of the Board of Directors

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



















                           INVESTORS FIRST FUND, INC.
                     c/o Bear Stearns Funds Management Inc.
                               383 Madison Avenue
                            New York, New York 10179
                                   May 7, 2004

Dear Stockholder:

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

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

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

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

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

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

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

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

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

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














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

                                         Respectfully,

                                         William A. Clark
                                         Chairman of the Board of Directors

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















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

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

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

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

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

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

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

                                      By Order of the Board of Directors,


                                      Ralph W. Bradshaw, President

















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

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

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

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

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

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

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

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

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

                                    By Order of the Board of Directors,


                                    Ralph W. Bradshaw, President





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

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

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

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

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

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

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

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

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

                                            By Order of the Board of Directors,

                                            William A. Clark, President




                           INSTRUCTIONS FOR SIGNING PROXY CARDS


         The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense to the Fund involved in
validating your vote if you fail to sign your proxy card properly.

1.       Individual Accounts: Sign your name exactly as it appears in the
         registration on the proxy card.

2.       Joint Accounts: Either party may sign, but the name of the party
         signing should conform exactly to a name shown in the registration.

3.       Other Accounts: The capacity of the individual signing the proxy card
         should be indicated unless it is reflected in the form of registration.
         For example:


                                  REGISTRATION


CORPORATE ACCOUNTS                                            VALID SIGNATURE

(1) ABC Corp.................................................ABC Corp.
                                                        (by John Doe, Treasurer)
(2) ABC Corp.................................................John Doe, Treasurer
(3) ABC Corp.
     c/o John Doe, Treasurer..................................John Doe
(4)  ABC Corp. Profit Sharing Plan............................John Doe, Trustee

TRUST ACCOUNTS

(1) ABC Trust................................................Jane B. Doe,
                                                             Trustee
(2) Jane B. Doe, Trustee
    u/t/d/ 12/28/78..........................................Jane B. Doe

CUSTODIAL OR ESTATE ACCOUNTS

(1) John B. Smith, Cust.
    f/b/o John B. Smith, Jr. UGMA............................John B. Smith
(2) John B. Smith............................................John B. Smith, Jr.,
                                                             Executor








                       COMBINED PROXY STATEMENT/PROSPECTUS

                                       OF

                     CORNERSTONE STRATEGIC VALUE FUND, INC.

                          PROGRESSIVE RETURN FUND, INC.

                                       AND

                           INVESTORS FIRST FUND, INC.

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

         Throughout this Combined Proxy Statement/Prospectus the CLM Annual
Meeting, PGF Annual Meeting and the MGC Annual Meeting shall collectively be
referred to as the "Meetings." The approximate mailing date of this Proxy
Statement/Prospectus is May 11, 2004.

PURPOSE OF THE MEETINGS.

         The Meetings are being called for the following purposes:

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

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

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

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

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

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


                                       i





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

         SPECIFICS OF EACH PLAN OF REORGANIZATION.

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

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

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

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

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

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



                                       ii




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

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

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

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


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


         PGF MERGER


         Assuming the stockholders of PGF and CLM approve the PGF Merger and
that all other conditions contained in the PGF Merger Agreement are satisfied or
waived, CLM and PGF will jointly file articles of merger (the "PGF Articles of
Merger"), with the State Department of Assessments and Taxation of Maryland (the
"Department"). It is proposed that the PGF Merger will become effective on June
30, 2004, or such other date as may result from the application of the terms of
the PGF Merger Agreement (the "PGF Effective Date"). PGF, as soon as practicable
after the PGF Effective Date, will terminate its registration under the
Investment Company Act of 1940, as amended (the "Investment Company Act").


         MGC MERGER


         Assuming the stockholders of MGC and CLM approve the MGC Merger and
that all other conditions contained in the MGC Merger Agreement are satisfied or
waived, CLM and MGC will jointly file articles of merger (the "MGC Articles of
Merger"), with the Department. It is proposed that the MGC Merger will become
effective on June 30, 2004, or such other date as may result from the
application of the terms of the MGC Merger Agreement (the "MGC Effective Date").
MGC, as soon as practicable after the MGC Effective Date, will terminate its
registration under the Investment Company Act.

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

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


                                      iii





           A Statement of Additional Information (the "SAI") dated May 7, 2004,
which contains additional information about CLM has been filed with the SEC. The
SAI for CLM and financial statements of PGF, CLM and MGC for the calendar year
ended December 31, 2003 are incorporated by reference into this Proxy
STATEMENT/PROSPECTUS. Copies of these documents are available upon request and
without charge by writing to the Assistant Secretary of the Fund c/o Bear
Stearns Funds Management Inc. located at 383 Madison Avenue, 23rd Floor, New
York, New York 10179, or by calling 1-800-937-5449 for CLM and PGF, or
1-800-331-1710 for MGC. PGF has provided the information included in this Proxy
Statement/Prospectus regarding that Fund, CLM has provided the information
included in this Proxy Statement/Prospectus regarding that Fund, and MGC has
provided the information included in this Proxy Statement/Prospectus regarding
that Fund.


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

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

           The date of this Proxy Statement/Prospectus is May 7, 2004


















                                       iv






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

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

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

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

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

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

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

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

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

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



                                       v






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

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

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

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

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

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

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

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

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

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

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

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

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

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



                                       vi








                                     GENERAL

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

         This Proxy Statement/Prospectus, the Notices of Meeting to Stockholders
and the proxy card(s) (attached hereto as Exhibits C) are first being mailed to
stockholders on or about May 11, 2004 or as soon as practicable thereafter.
Any stockholder who gives a proxy has the power to revoke the proxy either: (i)
by mail, addressed to the Secretary of the respective Fund, at the Fund's
mailing address, or (ii) in person at the Meeting by executing a superseding
proxy or by submitting a notice of revocation to the respective Fund. All
properly executed proxies received in time for the meetings will be voted as
specified in the proxy or, if no specification is made, "FOR" each proposal for
that Fund.

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

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

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

QUORUM

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

REQUIRED VOTE

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

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

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

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



                                      -1-



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

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

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

         Proxy solicitations will be made primarily by mail, but solicitations
may also be made by telephone, telegraph or personal interviews conducted by
officers or employees of each Fund, Cornerstone Advisors, Inc., the investment
adviser of CLM and PGF ("Cornerstone Advisors" or the "Advisor"), Bear Stearns
Funds Management Inc., the administrator to each Fund ("BSFM" or the
"Administrator"), and InvestorCONNECT, a professional proxy solicitor
("InvestorCONNECT"). Each Fund will bear its respective costs of solicitation.

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

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

           Each of CLM, PGF and MGC provide periodic reports to all of its
stockholders. These reports highlight relevant information including investment
results and a review of portfolio changes for each Fund. You may receive a copy
of the most recent annual and semi-annual reports for CLM, PGF or MGC, without
charge, by calling 1-800-937-5449 for CLM and PGF, or 1-800-331-1710 for MGC or
writing to the Secretary of the Fund c/o Bear Stearns Funds Management Inc.
located at 383 Madison Avenue, 23rd Floor, New York, New York 10179.

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






                                      -2-




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

                                   PROPOSAL 1:

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

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

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

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

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

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

         As a result of the PGF Merger:

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

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

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



                                      -3-



                                    SYNOPSIS

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

THE PROPOSED PGF MERGER.

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

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

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

FORM OF ORGANIZATION.

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

INVESTMENT OBJECTIVES.

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

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

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

NET ASSETS OF THE FUNDS

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



                                      -4-



FEES AND EXPENSES--PGF AND CLM

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

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

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

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

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



                                      -5-



DISTRIBUTION POLICIES

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

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

FEDERAL INCOME TAX CONSEQUENCES OF THE PGF MERGER.

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

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

UNREALIZED CAPITAL GAINS/LOSSES

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

EXPENSES OF THE PGF MERGER.

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

                             PRINCIPAL RISK FACTORS

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

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



                                      -6-



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

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

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

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

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

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

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

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



                                      -7-



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

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

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

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

         MARKET DISCOUNT FROM NET ASSET VALUE. Shares of closed end investment
companies frequently trade at a discount from their net asset value. This
characteristic is a risk separate and distinct from the risk that a Fund's net
asset value could decrease as a result of its investment activities and may be
greater for investors expecting to sell their shares in a relatively short
period following completion of this offering. The net asset value of the common
stock will be reduced immediately following the offering as a result of the
payment of certain offering costs. Whether investors will realize gains or
losses upon the sale of the common stock will depend not upon the Fund's net
asset value but entirely upon whether the market price of the common stock at
the time of sale is above or below the investor's purchase price for the common
stock. Because the market price of the common stock will be determined by
factors such as relative supply of and demand for the common stock in the
market, general market and economic conditions, and other factors beyond the
control of the Fund, the Fund cannot predict whether the common stocks will
trade at, below or above net asset value. As of December 31, 2003, each of CLM
and PGF were trading at substantial premiums to their net asset value, 30.43%
and 30.82%, respectively.

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






                                      -8-






                                  EXPENSE TABLE

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

SHAREHOLDER TRANSACTION
EXPENSES

ANNUAL EXPENSES(1)
    Investment Advisory
                                                                               
    Fees                    1.00%       1.00%      1.00%         1.00%          1.00%            1.00%
    Other Expenses(2)
                            0.51%       0.48%      1.13%         0.41%          0.27%            0.25%
TOTAL ANNUAL EXPENSES

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




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




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



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

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



                              FINANCIAL HIGHLIGHTS

         The information required in this portion is being incorporated by
reference from each Fund's Annual Report to Stockholders filed with the SEC.
This information was audited by Tait, Weller & Baker, each Fund's independent
auditors, whose reports, along with each Fund's financial statements, are
incorporated herein by reference and included in each Fund's Annual Report to
Stockholders. Each of the Fund's Annual Report and Semi-Annual Report may be
obtained without charge, by writing to the Secretary of the Fund c/o Bear
Stearns Funds Management Inc., 383 Madison Avenue, 23 Fl., New York, New York
10179, or by calling 1-800-937-5449 for CLM and PGF, or 1-800-331-1710 for MGC.



                                      -9-



                COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES

ORGANIZATION.

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

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

INVESTMENT OBJECTIVES.

         CLM

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

         PGF

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

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



                                      -10-



COMPARISON OF INVESTMENT POLICIES.

         CLM

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

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

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

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

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

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

         PGF

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

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



                                      -11-



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

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

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

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

EACH FUND'S NON-PRINCIPAL INVESTMENT POLICIES

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

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

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

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



                                      -12-



         Under the Investment Company Act, neither Fund may:

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

                       UNITED STATES FEDERAL INCOME TAXES

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

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

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

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

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

         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



                                      -13-


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

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

                          INFORMATION ABOUT THE MERGER

GENERAL.

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

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

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

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

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

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






                                      -14-



REASONS FOR THE PGF MERGER.

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

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

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

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

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

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

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

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

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

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



                                      -15-



TERMS OF THE PGF MERGER AGREEMENT.

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

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

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

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

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

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

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

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





                                      -16-



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


EXPENSES OF THE PGF MERGER.

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

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

TAX CONSIDERATIONS AND CONSEQUENCES OF THE MERGER

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

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


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


                                      -17-



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

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

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

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

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

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

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

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

         CASH IN LIEU OF FRACTIONAL SHARES

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


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

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



                                      -18-


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

                     ADDITIONAL INFORMATION ABOUT THE FUNDS

DESCRIPTION OF SECURITIES TO BE ISSUED.

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

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

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

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

PREMIUM/DISCOUNT TO NET ASSET VALUE.

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

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



                                      -19-







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

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

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



CAPITALIZATION.

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



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

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

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

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

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




                                      -20-


DIVIDENDS AND OTHER DISTRIBUTIONS.

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

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

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

PORTFOLIO VALUATION.

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

         For purposes of valuing assets in connection with the PGF Merger, the
assets of PGF will be valued pursuant to the principles and procedures
consistently utilized by CLM, which principles and procedures are also utilized
by PGF in valuing its own assets and determining its own liabilities. It is not
expected that CLM's valuation procedures as applied to PGF's portfolio
securities will result in any difference from the valuation that would have
resulted from the application of PGF's valuation procedures to such securities.






                                      -21-




DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN.

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

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

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

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

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

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

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

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

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



                                      -22-



CORPORATE GOVERNANCE PROVISIONS.

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

SPECIAL VOTING PROVISIONS AND REQUIREMENTS.

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

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

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

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

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



                                      -23-



BY-LAWS.

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

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

                             MANAGEMENT OF THE FUNDS

DIRECTORS AND PRINCIPAL OFFICERS.

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

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

INVESTMENT ADVISER.

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

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

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

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

ADMINISTRATOR.

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

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

         (1)      oversight of the determination and dissemination of each
                  Fund's net asset value in accordance with the respective
                  Fund's policy as adopted from time to time by the respective
                  Board of Directors;
         (2)      maintenance of the books and records of each Fund as required
                  under the Investment Company Act;



                                      -24-


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

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

CUSTODIAN.

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

TRANSFER AGENT AND REGISTRAR.

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

ESTIMATED EXPENSES.

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

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





                                      -25-




               CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

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

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

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

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

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

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

EXPERTS

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

REQUIRED VOTE

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

LEGAL PROCEEDINGS

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

LEGAL OPINIONS

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





                                      -26-



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

                                   PROPOSAL 2:

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

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

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

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

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

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

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

         As a result of the MGC Merger:

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

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



                                      -27-



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

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

                                    SYNOPSIS

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

THE PROPOSED MGC MERGER.

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

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

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

FORM OF ORGANIZATION.

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

INVESTMENT OBJECTIVES.

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

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



                                      -28-



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

NET ASSETS OF THE FUNDS

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

FEES AND EXPENSES--MGC AND CLM

         CLM

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

         MGC

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

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

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

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

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

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



                                      -29-



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

DISTRIBUTION POLICIES

         CLM

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

         MGC

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

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

FEDERAL INCOME TAX CONSEQUENCES OF THE MGC MERGER.

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

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

UNREALIZED CAPITAL GAINS

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

EXPENSES OF THE MGC MERGER.

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




                                      -30-


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

                             PRINCIPAL RISK FACTORS

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

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

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

         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.

         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



                                      -31-


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

         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.

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

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

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

         MARKET DISCOUNT FROM NET ASSET VALUE. Shares of closed end investment
companies frequently trade at a discount from their net asset value. This
characteristic is a risk separate and distinct from the risk that a Fund's net
asset value could decrease as a result of its investment activities and may be
greater for investors expecting to sell their shares in a relatively short
period following completion of this offering. The net asset value of the common
stock will be reduced immediately following the offering as a result of the
payment of certain offering costs. Whether investors will realize gains or
losses upon the sale of the common stock will depend not upon the Fund's net
asset value but entirely upon whether the market price of the common stock at
the time of sale is above or below the investor's purchase price for the common
stock. Because the market price of the common stock will be determined by



                                      -32-


factors such as relative supply of and demand for the common stock in the
market, general market and economic conditions, and other factors beyond the
control of the Fund, the Fund cannot predict whether the common stocks will
trade at, below or above net asset value. As of December 31, 2003, each of CLM
and MGC were trading at substantial premiums to their net asset value, 30.43%
and 12.66%, respectively.

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




                                                       EXPENSE TABLE


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

SHAREHOLDER
TRANSACTION EXPENSES

ANNUAL EXPENSES(1)
     Investment
                                                                                
     Advisory Fees          1.00%       1.00%       1.00%          1.00%           1.00%          1.00%
     Other Expenses(2)
                            1.13%       0.48%       0.51%          0.27%           0.41%          0.25%
TOTAL ANNUAL EXPENSES

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

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



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



                                   -33-




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

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

                              FINANCIAL HIGHLIGHTS

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

                COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES

ORGANIZATION.

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

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

INVESTMENT OBJECTIVES.

         CLM

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

         MGC

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



                                      -34-



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

COMPARISON OF INVESTMENT POLICIES.

         CLM

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

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

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

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

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

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

         MGC

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



                                      -35-



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

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

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

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

POST MERGER INVESTMENT POLICY

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

EACH FUND'S NON-PRINCIPAL INVESTMENT POLICIES

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

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

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



                                      -36-



         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. Not more than 10% of MGC's net assets will be invested
in repurchase agreements maturing in more than seven days.

         Under the Investment Company Act, neither Fund may:

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

                       UNITED STATES FEDERAL INCOME TAXES

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

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

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

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

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



                                      -37-



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

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

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

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

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

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



                                      -38-



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

REASONS FOR THE MGC MERGER.

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

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

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

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

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

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

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

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

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




                                      -39-


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

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

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

TERMS OF THE MGC MERGER AGREEMENT.

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

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

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

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




                                      -40-


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

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

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

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

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

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

EXPENSES OF THE MGC MERGER.

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

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

TAX CONSIDERATIONS AND CONSEQUENCES OF THE MGC MERGER.

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



                                      -41-



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


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

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

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

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

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

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

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

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

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



                                      -42-



         CASH IN LIEU OF FRACTIONAL SHARES

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


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

                     ADDITIONAL INFORMATION ABOUT THE FUNDS

DESCRIPTION OF SECURITIES TO BE ISSUED.

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

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

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

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

PREMIUM/DISCOUNT TO NET ASSET VALUE.

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

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




                                      -43-


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


                           Closing Market Closing Net


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

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

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



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

Capitalization.

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



                                       44


                     (in thousands, except per share values)


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

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

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

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




Dividends and Other Distributions.

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

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

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

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




                                       45


Portfolio Valuation.

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

         For purposes of valuing assets in connection with the MGC Merger, the
assets of MGC will be valued pursuant to the principles and procedures
consistently utilized by CLM, which principles and procedures are also utilized
by MGC in valuing its own assets and determining its own liabilities. It is not
expected that CLM's valuation procedures as applied to MGC's portfolio
securities will result in any difference from the valuation that would have
resulted from the application of MGC's valuation procedures to such securities.

Dividend Reinvestment and Cash Purchase Plan.

         CLM

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

         MGC

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

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

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

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



                                       46



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

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

Corporate Governance Provisions.

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

         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.

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

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

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

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

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

                             MANAGEMENT OF THE FUNDS

Directors and Principal Officers.

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

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

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



                                       47



Investment Adviser.

         CLM

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

         MGC

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

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

Administrator.

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

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

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

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

Custodian.

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

Transfer Agent and Registrar.

        CLM

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



                                       48



        MGC

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

Estimated Expenses.

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

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

               CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

         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:


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

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

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

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




                                       49



EXPERTS

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

REQUIRED VOTE

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

LEGAL PROCEEDINGS

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

LEGAL OPINIONS

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



                                       50



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

                                 CLM PROPOSAL 3

                   AMENDMENT TO THE ARTICLES OF INCORPORATION

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

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

Required Vote

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

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





                                       51





                                 CLM PROPOSAL 4

                              ELECTION OF DIRECTORS

         In accordance with the Fund's By-laws, the Fund's Board of Directors is
divided into three classes: Class I, Class II and Class III. Each class has a
term of three years and each year the term of office of one class expires. The
effect of these staggered terms is to limit the ability of other entities or
persons to acquire control of the Fund by delaying the replacement of a majority
of the Board of Directors. At a meeting held on February 20, 2004, Mr. Bentz, a
Class II Director, tendered his resignation and the Board elected Mr. William A.
Clark, based on the recommendation of the Nominating Committee, to fill the
vacancy created by Mr. Bentz's resignation.

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

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

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

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



                                       52



                                    NOMINEES


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

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

Glenn W. Wilcox, Sr. (72)      Director     2000       Chairman of the Board      Director and Chairman
                                                       and Chief Executive        of Audit Committee of
                                                       Officer of Wilcox Travel   Investors First Fund,
                                                       Agency, Inc.; Director     Inc.; Director of
                                                       and Audit Committee        Wachovia Corp.; Board
                                                       Chairman of Progressive    Trustee of Appalachian
                                                       Return Fund, Inc. and      State University;
                                                       Cornerstone Total Return   Director, Champion
                                                       Fund, Inc.                 Industries, Inc.; and
                                                                                  Chairman, Tower
                                                                                  Associates, Inc. (a
                                                                                  real estate venture)

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

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

William A. Clark(58)**         Director,      2004     Director and Stockholder   Director,   Chairman  of
                               Vice                    of Cornerstone Advisors,   the Board and  President
                               President               Inc.; Director of          of    Investors    First
                                                       Progressive Return Fund,   Fund, Inc.
                                                       Inc.; former financial
                                                       consultant, Deep
                                                       Discount Advisors, Inc.;
                                                       Former Director of The
                                                       Austria Fund, Inc.


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



                                       53



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

                          Remaining Board of Directors

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

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

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

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

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



                                       54





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

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

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

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

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

*  Mr. Bentz resigned on February 20, 2004.



                                       55




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

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



         Code of Ethics

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

         Under the federal securities laws, the Fund is required to provide to
stockholders in connection with the Meeting, information regarding compensation
paid to Directors by the Fund as well as by the various other U.S. registered
investment companies advised by the Fund's investment adviser during its prior
fiscal year. The following table provides information concerning the
compensation paid during the year ended December 31, 2003, to each Director of
the Fund. Please note that the Fund has no bonus, profit sharing, pension or
retirement plans.
                                                            Total Compensation
                                             Aggregate         and From Fund
                              Director     Compensation        Fund Complex*
      Name of Director          Since       From Fund        Paid to Director

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

         Each Director attended at least seventy-five (75%) percent or more of
the five (5) meetings of the Board of Directors (including regularly scheduled
and special meetings) held during the period for which he was a Director.

         The Audit Committee

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




                                       56



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

         The Nominating Committee

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

         The Nominating Committee will consider all nominees recommended by
stockholders of the Fund, so long as stockholders send their recommendations in
writing to the Secretary of the Fund in a manner consistent with the Fund's
By-laws. Currently, the By-laws provide that the deadline for submitting a
stockholder proposal for inclusion in the Fund's proxy statement and proxy for
the Fund's 2005 annual meeting of stockholders pursuant to Rule 14a-8 of the SEC
is January 8, 2004. Stockholders wishing to submit proposals or director
nominations that are not to be included in such proxy statement and proxy must
deliver notice to the Secretary at the principal executive offices of the Fund
not later than the close of business on February 9, 2005 nor earlier than the
close of business on January 8, 2004. Stockholders are also advised to review
the Fund's Bylaws, which contain additional requirements with respect to advance
notice of stockholder proposals and director nominations.

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

Required Vote

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

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


                             AUDIT COMMITTEE REPORT

         On February 20, 2004, the Audit Committee met with management to review
and discuss the audited financial statements for the fiscal year ended December
31, 2003. The Audit Committee also conducted discussions with the Fund's
independent auditors, Tait, Weller & Baker, regarding the matters required by
the Statement on Auditing Standards No. 61. As required by Independence
Standards Board Standard No. 1, "Independence discussion with Audit Committees",


                                       57



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

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

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

                                               AUDIT COMMITTEE

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


                RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

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

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

Principal Accountant Fees and Services

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

                               2003                2002

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

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

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



                                       58



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

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

         Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Section 30(h) of the 1940 Act in combination require the Fund's
directors and officers, persons who own more than ten percent (10%) of the
Fund's common stock, and the Fund's investment manager and its directors and
officers, to file reports of ownership and changes in ownership with the SEC and
the AMEX. The Fund is not aware of anything to the contrary indicating that the
Fund's directors and officers, the Fund's investment manager and its directors
and officers have complied with all applicable filing requirements during the
year ended December 31, 2003.




                                       59




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

                              PGF'S STOCKHOLDERS.

                                 PGF PROPOSAL 2:

                              ELECTION OF DIRECTORS

         In accordance with the Fund's By-laws, the Fund's Board of Directors is
divided into three classes: Class I, Class II and Class III. Each class has a
term of three years and each year the term of office of one class expires. The
effect of these staggered terms is to limit the ability of other entities or
persons to acquire control of the Fund by delaying the replacement of a majority
of the Board of Directors. At a meeting held on February 20, 2004, Mr. Bentz, a
Class II Director, tendered his resignation and the Board elected Mr. William A.
Clark, based on the recommendation of the Nominating Committee, to fill the
vacancy created by Mr. Bentz's resignation.

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

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

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

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




                                       60




                                    NOMINEES

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

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

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

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

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

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




                                       61



                          Remaining Board of Directors

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


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

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

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

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



                                       62



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

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



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



                                                                 Aggregate Dollar Range of Equity
                                                                 Securities in All Funds Overseen
                               Dollar    Range   of   Equity     by Directors in Fund Complex.
            Name               Securities in the Fund.
   ------------------------    ------------------------------    ----------------------------------
   Non-Interested Directors:
   ------------------------    ------------------------------    ----------------------------------
                                                           
   Edwin Meese III             0                                 0
   Andrew A. Strauss           $1-$10,000                        $10,001-$50,000
   Thomas H. Lenagh            0                                 0
   Glenn W. Wilcox Sr.         $1-$10,000                        $10,001-$50,000
   Scott B. Rogers             0                                 0
   Interested Directors:
   Ralph W. Bradshaw           $10,001-$50,000                   Over $100,000
   William A. Clark            $10,001-$50,000                   Over $100,000
   Gary A. Bentz*              $Over $100,000                    Over $100,000
   *  Mr. Bentz resigned on February 20, 2004.


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



                                       63




                                          Term of
Name, Address(1) & Age      Position(s)   Office     Principal Occupation during past 5 years
                            with Fund     Since
--------------------------- ------------- ---------- --------------------------------------------------
                                    
Jodi Levine (34)            Treasurer     2004       Associate Director, Bear Stearns Funds
                                                     Management Inc.

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



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

         Code of Ethics

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

         Under the federal securities laws, the Fund is required to provide to
stockholders in connection with the Meeting, information regarding compensation
paid to Directors by the Fund as well as by the various other U.S. registered
investment companies advised by the Fund's investment adviser during its prior
fiscal year. The following table provides information concerning the
compensation paid during the year ended December 31, 2003, to each Director of
the Fund. Please note that the Fund has no bonus, profit sharing, pension or
retirement plans.

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

         Each Director attended at least seventy-five (75%) percent or more of
the five (5) meetings of the Board of Directors (including regularly scheduled
and special meetings) held during the period for which he was a Director.

         The Audit Committee

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



                                       64



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

         The Nominating Committee

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

         The Nominating Committee will consider all nominees recommended by
stockholders of the Fund, so long as stockholders send their recommendations in
writing to the Secretary of the Fund in a manner consistent with the Fund's
By-laws. Currently, the By-laws provide that the deadline for submitting a
stockholder proposal for inclusion in the Fund's proxy statement and proxy for
the Fund's 2005 annual meeting of stockholders pursuant to Rule 14a-8 of the SEC
is January 8, 2004. Stockholders wishing to submit proposals or director
nominations that are not to be included in such proxy statement and proxy must
deliver notice to the Secretary at the principal executive offices of the Fund
not later than the close of business on February 9, 2005 nor earlier than the
close of business on January 8, 2004. Stockholders are also advised to review
the Fund's Bylaws, which contain additional requirements with respect to advance
notice of stockholder proposals and director nominations.

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

Required Vote

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

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



                                       65



                             AUDIT COMMITTEE REPORT

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

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

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

                                 AUDIT COMMITTEE

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


                RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

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

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



PRINCIPAL ACCOUNTANT FEES AND SERVICES

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




                                       66





                               2003                2002

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

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

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

         Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Section 30(h) of the 1940 Act in combination require the Fund's
directors and officers, persons who own more than ten (10%) of the Fund's common
stock, and the Fund's investment manager and its directors and officers, to file
reports of ownership and changes in ownership with the SEC and the AMEX. The
Fund is not aware of anything to the contrary indicating that the Fund's
directors and officers, the Fund's investment manager and its directors and
officers have complied with all applicable filing requirements during the year
ended December 31, 2003.




                                       67



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

                                 MGC PROPOSAL 2:

                              ELECTION OF DIRECTORS

         In accordance with MGC's Articles of Incorporation, the Board is
divided into three classes with each class having a three year term and each
year the term of office of one class expires. The effect of these staggered
terms is to limit the ability of other entities or persons to acquire control of
MGC by delaying the replacement of a majority of the Board of Directors.

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

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

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

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




                                       68



                              INDEPENDENT NOMINEES




                                                                                  Directorships held by
                               Position       Term     Principal Occupation       Nominee for Director
Name, Address(1) & Age         with Fund      Since    during past 5 years        Outside of Fund Complex
------------------------------------------------------------------------------------------------------------
                                                                      
William A. Clark (58)           Chairman of    2003    Director and Stockholder   Director of Progressive
                                the Board,             of Cornerstone Advisors,   Return Fund, Inc.,
                                 President             Inc.; former financial     Cornerstone Strategic
                               and Director            consultant, Deep           Value Fund, Inc. and
                                                       Discount Advisors, Inc.;   Cornerstone Total
                                                       Former Director of The     Return Fund, Inc.
                                                       Austria Fund, Inc.

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


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



                                       69



                          REMAINING BOARD OF DIRECTORS

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


                                              Term
                                              of                                  Directorships held by
                               Position       Office   Principal Occupation       Nominee for Director
Name, Address(1) & Age         with Fund      Since    during past 5 years        Outside of Fund Complex
------------------------------------------------------------------------------------------------------------
                                                                      
Thomas H. Lenagh (81)          Director       2003     Chairman of the Board of   Director of Progressive
                                                       Photonics Products         Return Fund, Inc.,
                                                       Group; Independent         Cornerstone Strategic
                                                       Financial Adviser;         Value Fund, Inc. and
                                                                                  Cornerstone Total
                                                                                  Return Fund, Inc., The
                                                                                  Adams Express Company
                                                                                  and Petroleum and
                                                                                  Resources Corporation

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

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


                                       70



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



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

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

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


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

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


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

                               Executive Officers

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


Name, Address(1) & Age    Position(s)    Term of        Principal Occupation during past 5
                          with Fund      Office Since   years
------------------------- -------------- -------------- ----------------------------------------
                                               
Thomas R. Westle (50)     Secretary      2003           Partner of Blank Rome LLP, previous
                                                        partner of Spitzer & Feldman P.C.;
                                                        Secretary of Progressive Return Fund,
                                                        Inc., Cornerstone Total Return Fund,
                                                        Inc. and Investors First Fund, Inc.


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



                                       71


         Under the federal securities laws, the Fund is required to provide to
stockholders in connection with the Meeting, information regarding compensation
paid to Directors by the Fund as well as by the various other U.S. registered
investment companies advised by the Fund's investment adviser during its prior
fiscal year. The following table provides information concerning the
compensation paid during the year ended December 31, 2003, to each Director of
the Fund. Please note that the Fund has no bonus, profit sharing, pension or
retirement plans.



                                            Aggregate       Total Compensation From Fund
                              Director     Compensation     and Fund Complex(1) Paid to
      Name of Director          Since       From Fund                 Director
----------------------------------------------------------------------------------------
                                                            
Ralph W. Bradshaw               2001         $30,041                 $30,041(2)
Glenn W. Wilcox, Sr.            2002         $26,000                 $26,000(2)
Andrew A. Strauss               2002         $25,500                 $25,500(2)
Edwin Meese III                 2003          $9,972                 $9,972(2)
William Clark                   2003          $9,157                 $9,157(2)
Thomas H. Lenagh                2003          $9,972                 $9,972(2)
Richard Wood(3)                 1987         $28,518                  $28,518
Mark P. Naylor(4)               2002         $21,500                  $21,500
Robert Kuftinec                 2002         $14,054                  $14,054


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

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

         The Audit Committee

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

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

         The Nominating Committee

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


                                       72



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

         The Nominating Committee will consider all nominees recommended by
stockholders of the Fund, so long as stockholders send their recommendations in
writing to the Secretary of the Fund in a manner consistent with the Fund's
By-laws. Currently, the Fund's Bylaws provide that in order for a stockholder to
nominate a candidate for election as a director at an annual meeting of
stockholders or propose business for consideration at such meeting, notice must
generally be given in writing to the Secretary of the Fund at the principal
executive office of the Fund not later than the close of business on the 90th
day nor earlier than the close of business on the 120th day prior to the first
anniversary of the mailing of the notice for the preceding year's annual
meeting. Accordingly, a stockholder nomination or proposal intended to be
considered at the 2005 Annual Meeting must be received by the Secretary after
the close of business on January 8, 2004, and prior to the close of business
on February 9, 2005. Proposals should be mailed to the Fund, to the attention of
the Fund's Secretary, c/o Bear Stearns Funds Management Inc., 383 Madison
Avenue, 23rd Floor, New York, NY 10169. A copy of the Bylaws may be obtained
from the Fund's Secretary by written request to the same address. In addition,
if you wish to have your proposal considered for inclusion in the Fund's 2005
Proxy Statement, we must receive it on or before January 8, 2004.

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

         Code of Ethics

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

         Required Vote

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

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

                             AUDIT COMMITTEE REPORT

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


                                       73



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

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

                                                     AUDIT COMMITTEE

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


                RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

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

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

Principal Accountant Fees and Services

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

                                TWB                KPMG             KPMG
                               2003                2003             2002

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

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


                                       74



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

         Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Section 30(h) of the 1940 Act in combination require the Fund's
directors and officers, persons who own more than ten (10%) of the Fund's common
stock, and the Fund's investment manager and its directors and officers, to file
reports of ownership and changes in ownership with the SEC and the NYSE. The
Fund is not aware of anything to the contrary indicating that the Fund's
directors and officers, the Fund's investment manager and its directors and
officers have complied with all applicable filing requirements during the year
ended December 31, 2003.

                             ADDITIONAL INFORMATION

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

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

Stockholder Communications with the Board

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

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

Other Matters to Come Before the Meeting.

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



                                       75



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

                                    CORNERSTONE STRATEGIC VALUE FUND, INC.

                                    Ralph W. Bradshaw
                                    President


                                    PROGRESSIVE RETURN FUND, INC.


                                    Ralph W. Bradshaw
                                    President


                                    INVESTORS FIRST FUND, INC.

                                    William A. Clark
                                    President






                                       76




                                                                       EXHIBIT A


                   MERGER AGREEMENT AND PLAN OF REORGANIZATION

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

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


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

1. DEFINITIONS


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


2. BASIC TRANSACTION


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


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

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

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


3. REPRESENTATIONS AND WARRANTIES OF PGF


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



                                      A-1




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


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

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

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


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


         3.6. This Section has been left intentionally Blank.

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

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


                                      A-2




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


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


         3.11. Tax Filings.

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

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

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


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

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


                                      A-3



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


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


         3.14. Capitalization.


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


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


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


4. REPRESENTATIONS AND WARRANTIES OF CLM


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


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


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



                                      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 CLM of the transactions contemplated herein, except (i) such
as have been obtained or applied for under the 1933 Act, the 1934 Act and the
1940 Act, (ii) such as may be required by state securities laws and (iii) such
as may be required under Maryland law for the acceptance for record of the
Articles of Merger by the Department.


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

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

         4.6. This Section has been intentionally left blank.


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


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


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

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



                                      A-5



         4.11. Tax Filings.

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

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


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


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

         4.14. Capitalization.

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


                                      A-6



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

         4.15. Issuance of Stock.


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


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


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


5. CONVERSION TO CLM COMMON STOCK


         5.1. Conversion.

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

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

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


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


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


                                      A-7



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

6. COVENANTS OF THE FUNDS

         6.1. Shareholders' Meetings.


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


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


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


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


         6.4. Regulatory Filings.


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

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

         (c) This Section has been intentionally left blank.



                                      A-8



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


         6.6. [Intentionally omitted.]


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


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

7. CONDITIONS PRECEDENT TO OBLIGATIONS OF CLM

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


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


         7.2. Certificates and Statements by PGF.


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


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

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



                                      A-9



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


         7.4. Legal Opinions.

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

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

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


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


         7.8. Regulatory Filings.


         (a) This Section has been intentionally left blank.


         (b) This Section has been intentionally left blank.


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

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

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



                                      A-10




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


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


8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PGF


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


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


         8.2. Certificates and Statements by CLM.


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


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


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


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


         8.4. Legal Opinions.

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



                                      A-11



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

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

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

         8.7. Regulatory Filings.


         (a) This Section has been intentionally left blank.


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


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


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


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


9. PAYMENT OF EXPENSES

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



                                      A-12



10. COOPERATION FOLLOWING EFFECTIVE DATE


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


11.      INDEMNIFICATION


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


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


12. TERMINATION, POSTPONEMENT AND WAIVERS


         12.1. Termination.

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

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


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


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



                                      A-13




         12.3. Expiration of Representations and Warranties.


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


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


13.      MISCELLANEOUS


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


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


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


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


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

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


                                      A-14




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

If to PGF:

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

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

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

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


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


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


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


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




                                      A-15



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



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


                                    PROGRESSIVE RETURN FUND, INC.


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


                                    CORNERSTONE STRATEGIC VALUE FUND, INC.


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




                                      A-16

                                                                       EXHIBIT B

                   MERGER AGREEMENT AND PLAN OF REORGANIZATION


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

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


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


1. DEFINITIONS


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


2. BASIC TRANSACTION


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


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

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

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



                                      B-1



3. REPRESENTATIONS AND WARRANTIES OF MGC


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


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


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

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

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


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


         3.6. This Section has been left intentionally Blank.

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

         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 MGC or any properties or assets held by it. MGC
knows of no facts which might form the basis for the institution of such


                                      B-2



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


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


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


         3.11. Tax Filings.

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

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

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




                                      B-3



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

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

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


         3.14. Capitalization.


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


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

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

4. REPRESENTATIONS AND WARRANTIES OF CLM


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


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


                                      B-4


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


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


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

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

         4.6. This Section has been intentionally left blank.


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


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


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

         4.10. Undisclosed Liabilities. Since entering into this Agreement,
there has not been any material adverse change in CLM's financial condition,
assets, liabilities, or business and CLM has no known liabilities of a material
amount, contingent or otherwise, required to be disclosed in a balance sheet
with GAAP other than those shown on CLM's statements of assets, liabilities and


                                      B-5



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

         4.11. Tax Filings.

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


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


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


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

         4.14. Capitalization.

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


                                      B-6




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


         4.15. Issuance of Stock.


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

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


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


5. CONVERSION TO CLM COMMON STOCK

5.1. Conversion.

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

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

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


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



                                      B-7



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


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

6. COVENANTS OF THE FUNDS

         6.1. Shareholders' Meetings.


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


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


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


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


         6.4. Regulatory Filings.


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


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



                                      B-8



         (c) This Section has been intentionally left blank.

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


         6.6. [Intentionally omitted.]


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


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

7. CONDITIONS PRECEDENT TO OBLIGATIONS OF CLM

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


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


         7.2. Certificates and Statements by MGC.


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


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

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


                                      B-9



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

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


         7.4. Legal Opinions.

         (a) CLM shall have received an opinion from Blank Rome LLP, as counsel
to MGC, in form and substance reasonably satisfactory to CLM and dated the
Effective Date.

         (b) CLM shall have received an opinion from Blank Rome LLP, as counsel
to CLM, dated the Effective Date, to the effect that for federal income tax
purposes the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code.

         7.5. Auditor's Consent and Certification. CLM shall have received from
Tait, Weller & Baker a letter dated as of the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Effective Date, in form and substance satisfactory to CLM, to the effect that
(i) they are independent public auditors with respect to MGC within the meaning
of the 1933 Act and the applicable published rules and regulations thereunder;
and (ii) in their opinion, the financial statements and supplementary
information of MGC included or incorporated by reference in the N-14
Registration Statement and reported on by them comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and the
published rules and regulations thereunder.

         7.6. Liabilities. The assets or liabilities of MGC to be transferred to
CLM shall not include any assets or liabilities which CLM, by reason of
limitations in its Registration Statement or Articles of Incorporation, may not
properly acquire or assume. CLM does not anticipate that there will be any such
assets or liabilities but CLM will notify MGC if any do exist and will reimburse
MGC for any reasonable transaction costs incurred by MGC for the liquidation of
such assets and liabilities.


         7.7. Effectiveness of N-14 Registration Statement. The N-14
Registration Statement shall have become effective under the 1933 Act and no
stop order suspending such effectiveness shall have been instituted or, to the
knowledge of CLM, contemplated by the SEC.


         7.8. Regulatory Filings.


         (a) This Section has been intentionally left blank.


         (b) This Section has been intentionally left blank.


         7.9. Administrative Rulings, Proceedings. The SEC shall not have issued
an unfavorable advisory report under Section 25(b) of the 1940 Act, nor
instituted or threatened to institute any proceeding seeking to enjoin
consummation of the Merger under Section 25(c) of the 1940 Act; no other legal,
administrative or other proceeding shall be instituted or threatened which would
materially affect the financial condition of MGC or would prohibit the Merger.

         7.10. Satisfaction of Progressive Return Fund, Inc. All proceedings
taken by MGC and its counsel in connection with the Merger and all documents
incidental thereto shall be satisfactory in form and substance to CLM.

         7.11. Dividends. Prior to the Effective Date, MGC shall have declared
and paid a dividend or dividends which, together with all such previous


                                      B-10



dividends, shall have the effect of distributing to its shareholders
substantially all of its net investment company taxable income that has accrued
through the Effective Date, if any (computed without regard to any deduction of
dividends paid), and substantially all of its net capital gain, if any, realized
through the Effective Date.


         7.12. Custodian's Certificate. MGC's custodian shall have delivered to
CLM a certificate identifying all of the assets of MGC held or maintained by
such custodian as of the Valuation Time.


         7.13. Books and Records. MGC's transfer agent shall have provided to
CLM (i) the originals or true copies of all of the records of MGC in the
possession of such transfer agent as of the Exchange Date, (ii) a certificate
setting forth the number of shares of MGC outstanding as of the Valuation Time,
and (iii) the name and address of each holder of record of any shares and the
number of shares held of record by each such shareholder.


8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MGC


         The obligations of MGC hereunder shall be subject to the following
conditions:


         8.1. Approval of Merger. This Agreement shall have been adopted, by the
affirmative vote of the holders of a majority of the shares of common stock of
MGC issued and outstanding and entitled to vote thereon and the affirmative vote
of the holders of a majority of the shares of common stock of CLM issued and
outstanding and entitled to vote thereon; and that CLM shall have delivered to
MGC a copy of the resolutions approving this Agreement adopted by its Board of
Directors and shareholders, certified by its secretary.


         8.2. Certificates and Statements by CLM.


         (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 MGC a certificate signed by its
President (or any Vice President), dated the Effective Date, certifying that as
of the Effective Date, all representations and warranties made in this Agreement
are true and correct in all material respects as if made at and as of such date
and each has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied at or prior to such dates.


         (c) CLM shall have delivered to MGC a letter from Tait, Weller & Baker,
dated the Effective Date, stating that such firm has performed a limited review
of the income Tax Returns for the period ended December 31, 2003, and that based
on such limited review, nothing came to their attention which caused them to
believe that such income Tax Returns did not properly reflect, in all material
respects, the income Taxes of CLM for the period covered thereby; and that for
the period from December 31, 2003 to and including the Effective Date, such firm
has performed a limited review to ascertain the amount of such applicable Taxes,
and has determined that either such amount has been paid or reserves established
for payment of such Taxes, this review to be based on unaudited financial data;
and that based on such limited review, nothing has come to their attention which
caused them to believe that the Taxes paid or reserves set aside for payment of
such Taxes were not adequate in all material respects for the satisfaction of
Taxes for the period from December 31, 2003, to and including the Effective Date
or that CLM would not continue to qualify as a RIC for federal income tax
purposes.


         8.3. Absence of Litigation. There shall be no material litigation
pending with respect to the matters contemplated by this Agreement.



                                      B-11



         8.4. Legal Opinions.

         (a) MGC shall have received an opinion from Blank Rome LLP, as counsel
to CLM, in form and substance reasonably satisfactory to MGC and dated the
Effective Date.

         (b) MGC shall have received an opinion from Blank Rome LLP dated the
Effective Date, to the effect that for federal income tax purposes the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code.

         8.5. Auditor's Consent and Certification. MGC shall have received from
Tait, Weller & Baker a letter dated as of the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Effective Date, in form and substance satisfactory to MGC, to the effect that
(i) they are independent public auditors with respect to CLM within the meaning
of the 1933 Act and the applicable published rules and regulations thereunder;
and (ii) in their opinion, the financial statements and supplementary
information of CLM incorporated by reference in the N-14 Registration Statement
and reported on by them comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder.

         8.6. 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 MGC, contemplated by the SEC.

         8.7. Regulatory Filings.


         (a) This Section has been intentionally left blank.


         (b) The SEC shall not have issued an unfavorable advisory report under
Section 25(b) of the 1940 Act, nor instituted or threatened to institute any
proceeding seeking to enjoin consummation of the Merger under Section 25(c) of
the 1940 Act; no other legal, administrative or other proceeding shall be
instituted or threatened which would materially affect the financial condition
of MGC or would prohibit the Merger.


         (c) CLM shall have received from any relevant state securities
administrator such order or orders as are reasonably necessary or desirable
under the 1933 Act, the 1934 Act, the 1940 Act, and any applicable state
securities or blue sky laws in connection with the transactions contemplated
hereby, and that all such orders shall be in full force and effect.


         8.8. Satisfaction of MGC. All proceedings taken by CLM and its counsel
in connection with the Merger and all documents incidental thereto shall be
satisfactory in form and substance to MGC.


         8.9. Dividends. Prior to the Effective Date, CLM shall have declared
and paid a dividend or dividends which, together with all such previous
dividends, shall have the effect of distributing to its shareholders
substantially all of its net investment company taxable income that has accrued
through the Effective Date, if any (computed without regard to any deduction of
dividends paid), and substantially all of its net capital gain, if any, realized
through the Effective Date.


9. PAYMENT OF EXPENSES

         9.1. Allocation. All expenses incurred in connection with the Merger
shall be allocated to the each Fund that incurred the expense. Such expenses
shall include, but not be limited to, all costs related to the preparation and
distribution of the N-14 Registration Statement, proxy solicitation expenses,
SEC registration fees, and NYSE listing fees. Neither of the Funds owe any
broker's or finder's fees in connection with the transactions provided for
herein.


                                      B-12




10. COOPERATION FOLLOWING EFFECTIVE DATE


         In case at any time after the Effective Date any further action is
necessary to carry out the purposes of this Agreement, each Funds will take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party may reasonably request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled to
indemnification as described below). MGC acknowledges and agrees that from and
after the Effective Date, CLM shall be entitled to possession of all documents,
books, records, agreements and financial data of any sort pertaining to MGC.


11. INDEMNIFICATION


         11.1. MGC. CLM agrees to indemnify and hold harmless MGC and each of
MGC's directors and officers from and against any and all losses, claims,
damages, liabilities or expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of investigation) to which jointly
and severally, MGC or any of its directors or officers may become subject,
insofar as any such loss, claim, damage, liability or expense (or actions with
respect thereto) arises out of or is based on any breach by CLM of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.


         11.2. CLM. MGC agrees to indemnify and hold harmless CLM and each of
CLM's directors and officers from and against any and all losses, claims,
liabilities or expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of investigation) to which jointly
and severally, CLM or any of its directors or officers may become subject,
insofar as any such loss, claim, damage, liability or expense (or actions with
respect thereto) arises out of or is based on any breach by MGC of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.


12. TERMINATION, POSTPONEMENT AND WAIVERS


         12.1. Termination.

         (a) Notwithstanding anything to the contrary in this Agreement, this
Agreement may be terminated and the Merger abandoned at any time (whether before
or after adoption by the shareholders of each Fund) prior to the Effective Date,
or the Effective Date may be postponed by: (i) mutual agreement of the Funds'
Board of Directors; (ii) the Board of Directors of CLM if any of the obligations
of MGC set forth in this Agreement has not been fulfilled or waived by such
Board or if MGC has made a material and intentional misrepresentation herein or
in connection herewith; or (iii) the Board of Directors of MGC if any of the
obligations of CLM set forth in this Agreement has not been fulfilled or waived
by such Board or if CLM has made a material and intentional misrepresentation
herein or in connection herewith.

         (b) If the transaction contemplated by this Agreement shall not have
been consummated by July 30, 2004, this Agreement automatically shall terminate
on that date, unless a later date is mutually agreed to by the Boards of
Directors of each Fund.


         (c) In the event of termination of this Agreement pursuant to the
provisions hereof, the Agreement shall become void and have no further effect,
and there shall not be any liability hereunder on the part of either Fund or its
directors or officers, except for any such material breach or intentional
misrepresentation, as to each of which all remedies at law or in equity of the
party adversely affected shall survive.


         12.2. Waiver. At any time prior to the Effective Date, any of the terms
or conditions of this Agreement may be waived by the Board of Directors of
either MGC or CLM (whichever is entitled to the benefit thereof), if, in the
judgment of such Board after consultation with its counsel, such action or
waiver will not have a material adverse effect on the benefits intended in this
Agreement to the shareholders of their respective fund, on behalf of which such
action is taken.



                                      B-13



         12.3. Expiration of Representations and Warranties.


         (a) The respective representations and warranties contained in Articles
3 and 4 of this Agreement shall expire with, and be terminated by, the
consummation of the Merger, and neither Fund nor any of its officers, directors,
agents or shareholders shall have any liability with respect to such
representations or warranties after the Effective Date. This provision shall not
protect any Fund's officer, director, agent or shareholder against any liability
to the entity for which that officer, director, agent or shareholder so acts or
to its shareholders to which that officer, director, agent or shareholder would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties in the conduct of such office.

         (b) If any order or orders of the SEC with respect to this Agreement
shall be issued prior to the Effective Date and shall impose any terms or
conditions which are determined by action of the Fund's Boards of Directors to
be acceptable, such terms and conditions shall be binding as if a part of this
Agreement without further vote or approval of the shareholders, unless such
terms and conditions shall result in a change in the method of computing the
number of shares of CLM common stock to be issued pursuant to this Agreement, in
which event, unless such terms and conditions shall have been included in the
proxy solicitation materials furnished to the shareholders prior to the meetings
at which the Merger shall have been approved, this Agreement shall not be
consummated and shall terminate unless the Funds call special meetings of
shareholders at which such conditions so imposed shall be submitted for
approval.

13. MISCELLANEOUS


         13.1. Transfer Restriction. Pursuant to Rule 145 under the 1933 Act,
and in connection with the issuance of any shares to any person who at the time
of the Merger is, to its knowledge, an affiliate of a party to the Merger
pursuant to Rule 145(c), CLM will cause to be affixed upon the certificate(s)
issued to such person (if any) a legend as follows:


         THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE
         SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
         EXCEPT TO PROGRESSIVE RETURN FUND, INC. (OR ITS STATUTORY SUCCESSOR)
         UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE
         UNDER THE SECURITIES ACT OF 1933 OR (II) IN THE OPINION OF COUNSEL
         REASONABLY SATISFACTORY TO THE FUND, SUCH REGISTRATION IS NOT REQUIRED.


and, further, that stop transfer instructions will be issued to CLM's transfer
agent with respect to such shares. MGC will provide CLM on the Effective Date
with the name of any MGC Shareholder who is to the knowledge of MGC an affiliate
of it on such date.


         13.2. Material Provisions. All covenants, agreements, representations
and warranties made under this Agreement and any certificates delivered pursuant
to this Agreement shall be deemed to have been material and relied upon by each
Fund, notwithstanding any investigation made by them or on their behalf.


         13.3. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:

If to MGC:
                           William A. Clark, President
                           c/o Bear Stearns Funds Management Inc.
                           Investors First Fund, Inc.
                           383 Madison Avenue
                           New York, New York 10179




                                      B-14



With copies to:
                           Thomas R. Westle, Esq.
                           Blank Rome LLP
                           405 Lexington Avenue, 24th Floor
                           New York, New York 10174

If to CLM:

                           Ralph Bradshaw, President
                           c/o Bear Stearns Funds Management Inc.
                           Progressive Return Fund, Inc.
                           383 Madison Avenue
                           New York, New York 10179

With copies to:
                           Thomas R. Westle, Esq.
                           Blank Rome LLP
                           405 Lexington Avenue, 24th Floor
                           New York, New York 10174

         Any Party may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims and other communications hereunder are to be delivered by giving the
other Fund notice in the manner herein set forth.

         13.4. Amendments. This Agreement may be amended, modified or
supplemented in such manner as may be mutually agreed upon in writing by the
authorized officers of MGC and CLM; provided, however, that following the
meeting of MGC and CLM shareholders to approve the Merger, no such amendment may
have the effect of changing the provisions for determining the number of CLM
shares to be issued to MGC shareholders under this Agreement to the detriment of
such shareholders without their further approval.


         13.5. Headings. The Article headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.


         13.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.


         13.7. Enforceability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.


         13.8. Successors and Assigns. This Agreement shall bind and inure to
the benefit of a Fund hereto and its successors and assigns, but no assignment
or transfer hereof or of any rights or obligations hereunder shall be made by
any party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and the Funds
shareholders and their respective successors and assigns, any rights or remedies
under or by reason of this Agreement.




                                      B-15



         13.9. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with the laws of the State of Maryland, without
regard to its principles of conflicts of law.

         IN WITNESS WHEREOF, each Fund has caused this Agreement to be executed
by its President.


                                    INVESTORS FIRST FUND, INC.


                                    By:
                                    --------------------------------------
                                    Name:   William A. Clark
                                    Title:  President


                                    CORNERSTONE STRATEGIC VALUE FUND, INC.


                                    By:
                                    --------------------------------------
                                    Name:   Ralph W. Bradshaw
                                            Title:   President





                                      B-16





                                                                      EXHIBIT C1
                               FORM OF PROXY CARD

                     CORNERSTONE STRATEGIC VALUE FUND, INC.

                  The undersigned stockholder of Cornerstone Strategic Value
Fund, Inc. (the "Fund") hereby constitutes and appoints Messrs. Ralph W.
Bradshaw, Thomas R. Westle and Frank J. Maresca, or any of them, the action of a
majority of them voting to be controlling, as proxy of the undersigned, with
full power of substitution, to vote all shares of common stock of the Fund
standing in his or her name on the books of the Fund at the Annual Meeting of
Stockholders of the Fund to be held on Thursday, June 10, 2004 at 10:30 a.m.,
New York time, at the offices of Bear Stearns Funds Management Inc., 383 Madison
Avenue, 13th Floor, Conference Room 301, New York, New York 10179, or at any
adjournment thereof, with all the powers which the undersigned would possess if
personally present, as designated on the reverse hereof.

         The undersigned hereby revokes any proxy previously given and instructs
the said proxies to vote in accordance with the aforementioned instructions with
respect to (1) the merger of Progressive Return Fund, Inc. with and into the
Fund; (2) the merger of Investors First Fund, Inc. with and into the Fund; (3)
the approval of the amendment to the Articles of Incorporation increasing the
amount of authorized shares; (4) the election of Messrs. Strauss and Wilcox, Sr.
as Class III Directors and Mr. Clark as a Class II Director; and (5) the
consideration and vote of such other matters as may properly come before the
Annual Meeting of Stockholders or any adjournment thereof.

         IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS
1, 2, 3, AND 4. ANY AND ALL OTHER PROPOSALS WILL BE VOTED BY THE PROXYHOLDERS IN
THE BEST INTERESTS OF STOCKHOLDERS AS DETERMINED BY THE SOLE JUDGMENT OF THE
PROXYHOLDERS AT THE TIME OF THE MEETING.


--------------------------------------------------------------------------------


     THIS PROXY IS SOLICITED ON BEHALF OF CORNERSTONE STRATEGIC VALUE FUND,
 INC.'S BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON

                                  June 10, 2004

                    (To be dated and signed on reverse side)


                                      C1-1



Please mark boxes / / or /X/ in blue or black ink.

Please mark your votes as in this example:

 --------
    X
 --------

--------------------------------------------------------------------------------
1. To approve the proposed merger of Progressive Return Fund, Inc. with and into
the Fund:

                                 FOR        AGAINST       ABSTAIN



2. To approve the proposed merger of Investors First Fund, Inc. with and into
the Fund:

                                  FOR       AGAINST        ABSTAIN



3. To approve the Amendment of the Articles of Incorporation increasing the
amount of authorized shares of common stock.

                                  FOR       AGAINST        ABSTAIN



4. To approve the election of Messrs. Andy A. Strauss, Glenn W. Wilcox, Sr. as
Class III Directors and Mr. William A. Clark as a Class II Director of the Fund.

                                          FOR       WITHHOLD



         FOR, except vote withheld from the following nominee(s):
-----------------------------------------------.


5. In their discretion, the proxies are authorized to vote upon such business as
may properly come before the meeting.


    THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE PROPOSALS.



                                      C1-2



This proxy, when properly executed, will be voted in the manner directed herein
by the stockholder.

Your proxy is important to assure a quorum at the Annual Meeting of Stockholders
whether or not you plan to attend the meeting in person. You may revoke this
proxy at anytime, and the giving of it will not effect your right to attend the
Annual Meeting of Stockholders and vote in person.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

Signature(s)____________________________    Date___________________

NOTE: Please sign exactly as name appears. When shares are held as joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer and if a
partnership, please sign in full partnership name by authorized person.










                                      C1-3


                                                                     EXHIBIT C-2

                               FORM OF PROXY CARD

                          PROGRESSIVE RETURN FUND, INC.

                  The undersigned stockholder of Progressive Return Fund, Inc.
(the "Fund") hereby constitutes and appoints Messrs. Ralph W. Bradshaw, Thomas
R. Westle and Frank J. Maresca, or any of them, the action of a majority of them
voting to be controlling, as proxy of the undersigned, with full power of
substitution, to vote all shares of common stock of the Fund standing in his or
her name on the books of the Fund at the Annual Meeting of Stockholders of the
Fund to be held on Thursday, June 10, 2004 at 10:00 a.m., New York time, at the
offices of Bear Stearns Funds Management Inc., 383 Madison Avenue, 13th Floor,
Conference Room 301, New York, New York 10179, or at any adjournment thereof,
with all the powers which the undersigned would possess if personally present,
as designated on the reverse hereof.

         The undersigned hereby revokes any proxy previously given and instructs
the said proxies to vote in accordance with the aforementioned instructions with
respect to (1) the merger of the Fund with and into Cornerstone Strategic Value
Fund, Inc.; (2) the election of Messrs. Lenagh and Strauss as Class I Directors
and Mr. Clark as a Class III Director; and (3) the consideration and vote of
such other matters as may properly come before the Annual Meeting of
Stockholders or any adjournment thereof.

         IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS
1, 2 AND 3. ANY AND ALL OTHER PROPOSALS WILL BE VOTED BY THE PROXYHOLDERS IN THE
BEST INTERESTS OF STOCKHOLDERS AS DETERMINED BY THE SOLE JUDGMENT OF THE
PROXYHOLDERS AT THE TIME OF THE MEETING.


--------------------------------------------------------------------------------


 THIS PROXY IS SOLICITED ON BEHALF OF PROGRESSIVE RETURN FUND, INC.'S BOARD OF
         DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON

                                  June 10, 2004

                    (To be dated and signed on reverse side)




                                      C2-1



Please mark boxes / / or /X/ in blue or black ink.

Please mark your votes as in this example:

 -----
   X
 -----

--------------------------------------------------------------------------------
1. To approve the proposed merger of the Fund with and into the Cornerstone
Strategic Value Fund, Inc.:

                                  FOR      AGAINST     ABSTAIN


2. To approve the election of Messrs. Thomas H. Lenagh and Andy A. Strauss as
Class I Directors and Mr. William A. Clark as a Class III Director.

                                    FOR              WITHHOLD


         FOR, except vote withheld from the following nominee(s):

-----------------------------------------------.


3. In their discretion, the proxies are authorized to vote upon such business as
may properly come before the meeting.


THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE PROPOSALS.






                                      C2-2




This proxy, when properly executed, will be voted in the manner directed herein
by the stockholder.

Your proxy is important to assure a quorum at the Annual Meeting of Stockholders
whether or not you plan to attend the meeting in person. You may revoke this
proxy at anytime, and the giving of it will not effect your right to attend the
Annual Meeting of Stockholders and vote in person.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

Signature(s)____________________________ Date___________________

         NOTE: Please sign exactly as name appears. When shares are held as
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer and if a partnership, please sign in full partnership name by authorized
person.







                                      C2-3



                                                                     EXHIBIT C-3

                                   PROXY CARD

                               FORM OF PROXY CARD

                           INVESTORS FIRST FUND, INC.

                  The undersigned stockholder of Investors First Fund, Inc. (the
"Fund") hereby constitutes and appoints Messrs. Ralph W. Bradshaw, Thomas R.
Westle and Frank J. Maresca, or any of them, the action of a majority of them
voting to be controlling, as proxy of the undersigned, with full power of
substitution, to vote all shares of common stock of the Fund standing in his or
her name on the books of the Fund at the Annual Meeting of Stockholders of the
Fund to be held on Thursday, June 10, 2004 at 9:30 a.m., New York time, at the
offices of Bear Stearns Funds Management Inc., 383 Madison Avenue, 13th Floor,
Conference Room 301, New York, New York 10179, or at any adjournment thereof,
with all the powers which the undersigned would possess if personally present,
as designated on the reverse hereof.

         The undersigned hereby revokes any proxy previously given and instructs
the said proxies to vote in accordance with the aforementioned instructions with
respect to (a) the merger of the Fund with and into Cornerstone Strategic Value
Fund, Inc.; (b) the election of two Directors to serve until the 2007 Annual
Meeting of Stockholders; and (c) the consideration and vote of such other
matters as may properly come before the Annual Meeting of Stockholders or any
adjournment thereof.

         IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS
1, 2 AND 3. ANY AND ALL OTHER PROPOSALS WILL BE VOTED BY THE PROXYHOLDERS IN THE
BEST INTERESTS OF STOCKHOLDERS AS DETERMINED BY THE SOLE JUDGMENT OF THE
PROXYHOLDERS AT THE TIME OF THE MEETING.


--------------------------------------------------------------------------------

        THIS PROXY IS SOLICITED ON BEHALF OF INVESTORS FIRST FUND, INC.'S
     BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON

                                  June 10, 2004

                    (To be dated and signed on reverse side)


                                      C3-1



Please mark boxes / / or /X/ in blue or black ink.

Please mark your votes as in this example:

 -----
   X
 -----

--------------------------------------------------------------------------------
1. To approve the proposed merger of the Fund with and into the Cornerstone
Strategic Value Fund, Inc.:

                                        FOR     AGAINST       ABSTAIN



2. To approve the election of Messrs. Ralph W. Bradshaw and William A. Clark as
Directors of the Fund to serve until the 2007 Annual Meeting of Stockholders.

                                         FOR                  WITHHOLD



         FOR, except vote withheld from the following nominee(s):

-----------------------------------------------.


3. In their discretion, the proxies are authorized to vote upon such business as
may properly come before the meeting.



    THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE PROPOSALS.



                                      C3-2



This proxy, when properly executed, will be voted in the manner directed herein
by the stockholder.

Your proxy is important to assure a quorum at the Annual Meeting of Stockholders
whether or not you plan to attend the meeting in person. You may revoke this
proxy at anytime, and the giving of it will not effect your right to attend the
Annual Meeting of Stockholders and vote in person.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

Signature(s)____________________________ Date___________________

         NOTE: Please sign exactly as name appears. When shares are held as
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer and if a partnership, please sign in full partnership name by authorized
person.




                                      C3-3



                                                                       EXHIBIT D

                              ARTICLES OF AMENDMENT

                                       of

                     CORNERSTONE STRATEGIC VALUE FUND, INC.

         CORNERSTONE STRATEGIC VALUE FUND, INC. (hereinafter referred to as the
"Corporation"), a Maryland corporation, hereby certifies to the State Department
of Assessments and Taxation of Maryland that:

         FIRST:   Article FIFTH of the Charter is hereby amended in part to
                  read as follows:

                  The total number of shares of capital stock that the
                  Corporation shall have authority to issue is One Hundred
                  Million (100,000,000) shares of common stock (the "Common
                  Stock") par value of one tenth of one percent ($0.001) per
                  share, all of which shall be of a single class, such shares
                  having an aggregate par value of One Hundred Thousand
                  ($1,000,000).

         SECOND:  The foregoing amendment to the Charter of the Corporation has
been  approved by the Board of  Directors  of the Corporation.

         IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on this ___th day of June, 2004.

                                    CORNERSTONE STRATEGIC VALUE FUND, INC.


                                          By:   /s/ Ralph W. Bradshaw
                                          --------------------------------
                                          Name:  Ralph W. Bradshaw
                                          Title: President

WITNESS:


         /s/ Thomas R. Westle
--------------------------------
Name:  Thomas R. Westle
Title: Secretary



                                      D-1



                                                                       EXHIBIT E
                     CORNERSTONE STRATEGIC VALUE FUND, INC.

                       CORNERSTONE TOTAL RETURN FUND, INC.

                          PROGRESSIVE RETURN FUND, INC.

                             Audit Committee Charter


1. Audit Committee Membership.

         The Audit Committee ("Audit Committee") of each of the Cornerstone
Strategic Value Fund, Inc., Cornerstone Total Return Fund, Inc. and the
Progressive Return Fund, Inc. (the "Funds") shall be composed entirely of
directors who are not "interested persons" (as such term is defined in the
Investment Company Act of 1940, as amended). Each member of an Audit Committee
shall have no relationship with the Funds, Cornerstone Advisors, Inc. (the
"Adviser"), or Bear Stearns Funds Management Inc. Membership of a Fund's Audit
Committee shall be determined by the respective Fund's full Board of Directors
from time to time at its sole discretion. If one or more members of the Audit
Committees qualify as an Audit Committee Financial expert (the "ACFE"), as
defined in Section 407 of the Sarbanes-Oxley Act of 2002, at least one such
member shall be designated as a Committees' ACFE. Such designation shall not
impose any greater responsibility or liability on that person than the
responsibility and liability imposed on such person as a member of the Audit
Committee.

2. Meetings.

         Each Audit Committee shall meet at least once a year and is empowered
to hold special meetings as circumstances require.

3. Purposes.

         The purposes of an Audit Committee is to:

1.   Assist each Board in its oversight of the Fund's accounting and financial
     reporting policies and practices, its internal controls over financial
     reporting and, as appropriate, the internal controls over financial
     reporting of certain service providers.

2.   Assist each Board in its oversight of the quality and objectivity of the
     Fund's financial statements and the independent audit thereof.

3.   Select, oversee and set compensation of each Fund's independent auditors
     (the "Auditor") and to act as a liaison between the Auditors and the full
     Board of Directors.

         The function of an Audit Committee is oversight; it is each Fund's
management's responsibility to maintain appropriate systems for accounting and
internal control over financial reporting, and the Auditors responsibility to
plan and carry out the audit in accordance with auditing standards generally
accepted in the United States. The Auditors are ultimately responsible to the
Boards of Directors and the Audit Committees, as representatives of the
shareholders.



4. Duties and Powers.

         To carry out their purposes, each Audit Committee shall have the
following duties and powers and shall apply the following principles:


                                      E-1


(a)     Selection of Auditors.

     (i)  The Audit Committee shall pre-approve the selection of the Auditors
          and shall recommend the selection, retention or termination of
          Auditors to the Boards and, in connection therewith, to evaluate the
          independence of the Auditors, including whether the Auditors provide
          any consulting, auditing or non-audit services to the Adviser or its
          affiliates. The Audit Committee shall review the Auditors' specific
          representations as to its independence;

     (ii) The Audit Committee shall review and approve the fees charged by the
          Auditors for audit and non-audit services in accordance with the
          pre-approval requirements set forth in (d) below. Each Fund shall
          provide for appropriate funding, as determined by its Audit Committee,
          to compensate the Auditors for any authorized service provided to the
          Fund.

(b)     Meetings with the Auditors.

         The Audit Committee shall meet with the Auditors, including private
meetings, as necessary to:

     (i)      review the arrangements for and scope of the annual audit and any
              special audits;
     (ii)     provide the Auditors the opportunity to report to the Audit
              Committee, on a timely basis all critical accounting policies and
              practices to be used;
     (iii)    discuss any matters of concern relating to a Fund's financial
              statements, including: (A) any adjustments to such statements
              recommended by the Auditors, or other results of said audit(s);
              and (B) all alternative treatments of financial information within
              generally accepted accounting principles that have been discussed
              with management, the ramifications of the use of such alternative
              disclosures and treatments, and the treatment preferred by the
              Auditors;

         (iv) provide the Auditors the opportunity to report to the Audit
Committee, on a timely basis, any material written communication between the
Auditors and management such as any management letter or schedule of unadjusted
differences;

         (v) provide the Auditors the opportunity to report all non-audit
services provided to any entity in the "investment company complex"1 that were
not pre-approved by the Audit Committees;

         (vi) consider the Auditors' comments with respect to a Fund's financial
policies, procedures and internal accounting controls and responses thereto by
the Fund's officers in accordance with Statement of Auditing Standards No. 61,
as amended;

       (vii) review the form of written opinion the Auditors propose to render
to each Board of Directors and shareholders; and

       (viii) provide the Auditors the opportunity to report on any other matter
that the Auditors deem necessary or appropriate to discuss with the Audit
Committee.

(c)      Change in Accounting Principles.

         The Audit Committee shall consider the effect upon its respective Fund
         of any changes in accounting principles or practices proposed by the
         Auditors or the Fund's officers.

--------------------
1  "INVESTMENT COMPANY COMPLEX" MEANS THE FUNDS, THE ADVISER AND ANY ENTITY
   CONTROLLED BY, CONTROLLING OR UNDER COMMON CONTROL WITH THE ADVISER IF SUCH
   ENTITY IS AN INVESTMENT ADVISER OR IS ENGAGED IN THE BUSINESS OF PROVIDING
   ADMINISTRATIVE, CUSTODIAN, UNDERWRITING OR TRANSFER AGENT SERVICES TO THE
   FUND OR ADVISER.



                                       E-2



(d)               Pre-Approval Requirements.

       (i) Pre-Approval Requirements. Before the Auditors are engaged by a Fund
           to render audit or non-audit services, either:

            (A)    The Audit Committee shall pre-approve all auditing services
                   and permissible non-audit services (e.g., tax services)
                   provided to the Fund. The Audit Committees may delegate to
                   one or more of its members the authority to grant
                   pre-approvals. The decision of any member to whom authority
                   is delegated under this section shall be presented to the
                   full Audit Committee at each of its scheduled meetings; or

            (B)    The engagement to render the auditing service or permissible
                   non-audit service is entered into pursuant to pre-approval
                   policies and procedures established by the Audit Committee.
                   Any such policies and procedures must (1) be detailed as to
                   the particular service and (2) not involve any delegation of
                   the Audit Committee's responsibilities to the Adviser. The
                   Audit Committee must be informed of each service entered into
                   pursuant to the policies and procedures. A copy of any such
                   policies and procedures shall be attached as an exhibit to
                   this Audit Committee Charter;

      (ii)  De Minimis Exceptions to Pre-Approval Requirements. Pre-Approval for
            a service provided to a Fund other than audit, review or attest
            services is not required if: (1) the aggregate amount of all such
            non-audit services provided to a Fund constitutes not more than 5
            percent of the total amount of revenues paid by the Fund to the
            Auditor during the fiscal year in which the non-audit services are
            provided; (2) such services were not recognized by the Fund at the
            time of the engagement to be non-audit services; and (3) such
            services are promptly brought to the attention of the Audit
            Committee and are approved by the Audit Committee or by one or more
            members of the Audit Committee to whom authority to grant such
            approvals has been delegated by the Audit Committee prior to the
            completion of the audit;

      (iii) Pre-Approval of Non-Audit Services Provided to the Adviser and
            Certain Control Persons. The Audit Committee shall pre-approve any
            non-audit services proposed to be provided by the Auditors to (a)
            the Adviser and (b) any entity controlling, controlled by, or under
            common control with the Adviser that provides ongoing services to
            the Funds, if the Auditors' engagement with the Adviser or any such
            control persons relates directly to the operations and financial
            reporting of the Funds.

                           Application of De Minimis Exception. The De Minimis
                  exception set forth above under Section 5(d)(ii) applies to
                  pre-approvals under this Section (iii) as well, except that
                  the "total amount of revenues" calculation is based on the
                  total amount of revenues paid to the Auditor by each Fund and
                  any other entity that has its services approved under this
                  Section (i.e., the Adviser or any control person).

      (iv)  The pre-approval requirements set forth above are optional to the
            extent that any engagement is entered into with the Auditor prior to
            May 6, 2003 (the effective date of the Securities and Exchange
            Commission ("SEC") regulations establishing such requirements).2
            Engagements entered into prior to May 6, 2003, are subject to any
            limitations set forth in the transition and grandfathering
            provisions in the SEC rules.


--------------------
2  THE FINAL RULES ADOPTED BY THE SECURITIES AND EXCHANGE COMMISSION RELATING TO
   PRE-APPROVAL REQUIREMENTS ARE SET FORTH IN STRENGTHENING THE COMMISSION'S
   REQUIREMENTS REGARDING AUDITOR INDEPENDENCE, RELEASE NO. IC-25915 (JAN. 28,
   2003).


                                      E-3



(e)      Prohibited Activities of the Auditor. An auditor who is performing the
         audit for a Fund may not perform contemporaneously (during the audit
         and professional engagement period) the following non-audit services
         for the Fund:

      (i)   bookkeeping or other services related to the accounting records or
            financial statements of the Fund;

      (ii)  financial information systems design and implementation;

      (iii) appraisal or valuation services, fairness opinions, or
            contribution-in-kind reports;

      (iv)  actuarial services;

      (v)   internal audit outsourcing services;

      (vi)  management functions or human resources;

      (vii) broker or dealer, investment adviser, or investment banking
            services;

      (viii) legal services and expert services unrelated to the audit; and

      (ix)  any other service that the Public Company Accounting Oversight Board
            determines, by regulation, is impermissible.

      The Auditors will be responsible for informing the Audit Committees of
      whether it believes that a particular non-audit service is permissible or
      prohibited pursuant to applicable regulations and standards.

      (f) Improprieties. Investigate improprieties or suspected improprieties in
          a Fund's operations.

      (g) Board Reports. Report its activities to the full Board on a regular
          basis and to make such recommendations with respect to the above and
          other matters, as the Audit Committee may deem necessary or
          appropriate.

5. Meetings with Treasurer/Advisory Personnel.

         The Audit Committee, in its discretion, may meet with the Treasurer of
         each Fund and with personnel of the Adviser.

6. Authority to Retain Counsel.

         The Audit Committee shall have the resources and authority appropriate
         to discharge their responsibilities, including the authority to retain
         special counsel and other experts or consultants at the expense of its
         respective Fund.

7. Annual Charter Review.

         Each Audit Committee shall review this Charter at least annually and
         recommend any changes to its full Board of Directors.

8. Qualified Legal Compliance Committee

Each Audit Committee shall act as the respective Fund's Qualified Legal
Compliance Committee ("QLCC") for the purpose of being presented with and
investigating any evidence of a material violation of securities laws by a Fund,
a breach of a fiduciary duty or a similar violation. Each QLCC will be
responsible for adopting written procedures for the confidential receipt,
retention, and consideration of any report of evidence of a material violation.



                                       E-4



See Exhibit A.

As the QLCC, the Committee shall have all powers that such a committee is
required to have under the U.S. Securities and Exchange Commissions rules, as
well as the powers granted to it under this Charter. Except to the extent that
the Committee adopts specific procedures for its functions as the QLCC, its
procedures as the Audit Committee shall be applicable to its actions as the
QLCC.

Each QLCC shall be responsible for the following:

(a) to inform a Fund's chief executive officer of any report of evidence of a
material violation, if the QLCC, in its sole discretion, deems necessary;

(b) to determine whether an investigation is necessary regarding any report of
evidence of a material violation by the Fund, its officers, directors,
Investment Adviser, employees or agents and, if it determines an investigation
is necessary or appropriate, to:

         (i) Notify the full Board of Directors;

         (ii) Initiate an investigation, which may be conducted either by the
              Fund Counsel or by outside attorneys; and

         (iii) Retain such additional expert personnel as the QLCC deems
               necessary; and

(c) At the conclusion of such investigation, to:

         (i) Recommend, by majority vote, that the Fund implement an appropriate
             response to evidence of a material violation; and

         (ii) Inform Fund Counsel, the Chief Executive Officer and the Board of
              Directors of the results of any such investigation under this
              section and the appropriate remedial measures to be adopted.



Dated:  August 30, 2003


                                      E-5




                                                                       EXHIBIT F

                           PGF AUDIT COMMITTEE CHARTER

                              Please See Exhibit E





                                       E-6






                                                                       EXHIBIT G
                           INVESTORS FIRST FUND, INC.

                             Audit Committee Charter


Audit Committee Membership: The Audit Committee ("Audit Committee") of Investors
First Fund, Inc. (the "Fund") shall be composed entirely of directors who are
not "interested persons" (as such term is defined in the Investment Company Act
of 1940, as amended). Each member of the Audit Committee shall have no
relationship with the Fund, Deutsche Asset Management Inc. (the "Adviser"), or
Bear Stearns Funds Management Inc. (the "Administrator"). Membership of the
Fund's Audit Committee shall be determined by the Board of Directors, from time
to time, at its sole discretion. If one or more members of the Audit Committee
qualifies as an Audit Committee Financial expert (the "ACFE"), as defined in
Section 407 of the Sarbanes-Oxley Act of 2002, at least one such member shall be
designated as the Committee's ACFE. Such designation shall not impose any
greater responsibility or liability on that person than the responsibility and
liability imposed on such person as a member of the Audit Committee.

Meetings:   The Audit Committee shall meet at least once a year and is
            empowered to hold special meetings as circumstances require.

Purpose: The purposes of the Audit Committee is to:

         1. Assist the Board in its oversight of the Fund's accounting and
            financial reporting policies and practices, its internal controls
            over financial reporting and, as appropriate, the internal controls
            over financial reporting of certain service providers.

         2. Assist the Board in its oversight of the quality and objectivity of
            the Fund's financial statements and the independent audit thereof.

         3. Select, oversee and set compensation of the Fund's independent
            auditor (the "Auditor") and to act as a liaison between the Auditor
            and the full Board of Directors.

         The function of the Audit Committee is oversight; it is the Fund's
management's responsibility to maintain appropriate systems for accounting and
internal control over financial reporting, and the Auditor's responsibility to
plan and carry out the audit in accordance with auditing standards generally
accepted in the United States. The Auditor is ultimately responsible to the
Board of Directors and the Audit Committee, as representatives of the
shareholders.

Duties and Powers: To carry out its purposes, the Audit Committee shall have the
following duties and powers and shall apply the following principles:

A. Selection of Auditor.

(i) The Audit Committee shall pre-approve the selection of the Auditor and shall
recommend the selection, retention or termination of Auditor to the Board and,
in connection therewith, to evaluate the independence of the Auditor, including
whether the Auditor provides any consulting, auditing or non-audit services to
the Adviser or its affiliates. The Audit Committee shall review the Auditor's
specific representations as to its independence;

(ii) The Audit Committee shall review and approve the fees charged by the
Auditor for audit and non-audit services in accordance with the pre-approval
requirements set forth in (d) below. The Fund shall provide for appropriate
funding, as determined by its Audit Committee, to compensate the Auditor for any
authorized service provided to the Fund.


                                       G-1



B. Meetings with the Auditors.

The Audit Committee shall meet with the Auditor, including private meetings, as
necessary to:

(i) review the arrangements for and scope of the annual audit and any special
audits;

(ii) provide the Auditor the opportunity to report to the Audit Committee, on a
timely basis all critical accounting policies and practices to be used; (iii)
discuss any matters of concern relating to the Fund's financial statements,
including:

          (A) any adjustments to such statements recommended by the Auditor, or
              other results of said audit; and

          (B) all alternative treatments of financial information within
              generally accepted accounting principles that have been discussed
              with management, the ramifications of the use of such alternative
              disclosures and treatments, and the treatment preferred by the
              Auditor;

(iv) provide the Auditor the opportunity to report to the Audit Committee, on a
timely basis, any material written communication between the Auditor and
management such as any management letter or schedule of unadjusted differences;
(v) provide the Auditor the opportunity to report all non-audit services
provided to any entity in the "investment company complex"3 that were not
pre-approved by the Audit Committee;
(vi) consider the Auditor's comments with respect to the Fund's financial
policies, procedures and internal accounting controls and responses thereto by
the Fund's officers in accordance with Statement of Auditing Standards No. 61,
as amended;
(vii) review the form of written opinion the Auditor proposes to render to the
Board of Directors and shareholders; and
(viii) provide the Auditor the opportunity to report on any other matter that
the Auditor deems necessary or appropriate to discuss with the Audit Committee.

C. Change in Accounting Principles.


         The Audit Committee shall consider the effect upon the Fund of any
         changes in accounting principles or practices proposed by the Auditor
         or the Fund's officers.

D. Pre-Approval Requirements.


         Pre-Approval Requirements. Before the Auditor is engaged by the Fund to
render audit or non-audit services, either:

1.                The Audit Committee shall pre-approve all auditing services
                  and permissible non-audit services (e.g., tax services)
                  provided to the Fund. The Audit Committee may delegate to one
                  or more of its members the authority to grant pre-approvals.
                  The decision of any member to whom authority is delegated
                  under this section shall be presented to the full Audit
                  Committee at its scheduled meeting; or
2.                The engagement to render the auditing service or permissible
                  non-audit service is entered into pursuant to pre-approval
                  policies and procedures established by the Audit Committee.
                  Any such policies and procedures must (1) be detailed as to
                  the particular service and (2) not involve any delegation of
                  the Audit Committee's responsibilities to the Adviser. The
                  Audit Committee must be informed of each service entered into
                  pursuant to the policies and procedures. A copy of any such
                  policies and procedures shall be attached as an exhibit to
                  this Audit Committee Charter;

-----------------------------
3  "INVESTMENT COMPANY COMPLEX" MEANS THE FUNDS, THE ADVISER AND ANY ENTITY
   CONTROLLED BY, CONTROLLING OR UNDER COMMON CONTROL WITH THE ADVISER IF SUCH
   ENTITY IS AN INVESTMENT ADVISER OR IS ENGAGED IN THE BUSINESS OF PROVIDING
   ADMINISTRATIVE, CUSTODIAN, UNDERWRITING OR TRANSFER AGENT SERVICES TO THE
   FUND OR ADVISER.


                                       G-2



3.                De Minimis Exceptions to Pre-Approval Requirements.
                  Pre-Approval for a service provided to a Fund other than
                  audit, review or attest services is not required if: (1) the
                  aggregate amount of all such non-audit services provided to
                  the Fund constitutes not more than 5 percent of the total
                  amount of revenues paid by the Fund to the Auditor during the
                  fiscal year in which the non-audit services are provided; (2)
                  such services were not recognized by the Fund at the time of
                  the engagement to be non-audit services; and (3) such services
                  are promptly brought to the attention of the Audit Committee
                  and are approved by the Audit Committee or by one or more
                  members of the Audit Committee to whom authority to grant such
                  approvals has been delegated by the Audit Committee prior to
                  the completion of the audit;
4.                Pre-Approval of Non-Audit Services Provided to the Adviser and
                  Certain Control Persons. The Audit Committee shall pre-approve
                  any non-audit services proposed to be provided by the Auditor
                  to (a) the Adviser and (b) any entity controlling, controlled
                  by, or under common control with the Adviser that provides
                  ongoing services to the Fund, if the Auditor's engagement with
                  the Adviser or any such control persons relates directly to
                  the operations and financial reporting of the Fund.


                           Application of De Minimis Exception. The De Minimis
                  exception set forth above under Section 5(d)(ii) applies to
                  pre-approvals under this Section (iii) as well, except that
                  the "total amount of revenues" calculation is based on the
                  total amount of revenues paid to the Auditor by the Fund and
                  any other entity that has its services approved under this
                  Section (i.e., the Adviser or any control person).

(h)      Prohibited Activities of the Auditor. An auditor who is performing the
         audit for the Fund may not perform contemporaneously (during the audit
         and professional engagement period) the following non-audit services
         for the Fund:

(x)      bookkeeping or other services related to the accounting records or
         financial statements of the Fund;

(xi)     financial information systems design and implementation;

(xii)    appraisal or valuation services, fairness opinions, or
         contribution-in-kind reports;

(xiii)   actuarial services;

(xiv)    internal audit outsourcing services;

(xv)     management functions or human resources;

(xvi)    broker or dealer, investment adviser, or investment banking services;

(xvii)   legal services and expert services unrelated to the audit; and

(xviii)  any other service that the Public Company Accounting Oversight Board
         determines, by regulation, is impermissible.

         The Auditor will be responsible for informing the Audit Committee of
         whether it believes that a particular non-audit service is permissible
         or prohibited pursuant to applicable regulations and standards.

(i)      Improprieties. Investigate improprieties or suspected improprieties in
         the Fund's operations.


                                      G-3


(j)      Board Reports. Report its activities to the full Board on a regular
         basis and to make such recommendations with respect to the above and
         other matters, as the Audit Committee may deem necessary or
         appropriate.

9.       Meetings with Treasurer/Advisory Personnel.

         The Audit Committee, in its discretion, may meet with the Treasurer of
the Fund and with personnel of the Adviser.

10. Authority to Retain Counsel.

         The Audit Committee shall have the resources and authority appropriate
         to discharge their responsibilities, including the authority to retain
         special counsel and other experts or consultants at the expense of the
         Fund.

11. Annual Charter Review.

         The Audit Committee shall review this Charter at least annually and
recommend any changes to the Board of Directors.

Dated:  November 20, 2003








                                      G-4





                     CORNERSTONE STRATEGIC VALUE FUND, INC.
                               383 Madison Avenue
                            New York, New York 10179


                                     PART B

                       STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information ("SAI"), relates specifically to the
shares of Cornerstone Strategic Value Fund, Inc. ("CLM") to be issued pursuant
to (i) an Agreement and Plan of Merger, dated June 18, 2004, whereby Progressive
Return Fund, Inc, will merge with and into CLM, and (ii) an Agreement and Plan
of Merger, dated June 18, 2004, whereby Investors First Fund, Inc. will merge
with and into CLM. This SAI does not constitute a prospectus. This SAI does not
contain all the information that a stockholder should consider before voting on
the proposal contained in the Proxy Statement/Prospectus that relates to their
fund, and, therefore, should be read in conjunction with the related Proxy
Statement/Prospectus, dated May 7, 2004. A copy of the Proxy
Statement/Prospectus may be obtained without charge by calling (212) 272-2093.
Please retain this document for future reference.














          THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED May 7, 2004



The SEC has not approved or disapproved these securities or determined if this
Proxy Statement/Prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.






                                TABLE OF CONTENTS


DESCRIPTION OF THE FUND......................................................  1

INVESTMENT POLICIES, RISKS AND RESTRICTIONS..................................  2

MANAGEMENT...................................................................  4

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS...................................  6

INVESTMENT MANAGEMENT AND OTHER SERVICES.....................................  6

PORTFOLIO TRANSACTIONS.......................................................  6

TAXATION.....................................................................  7

FINANCIAL STATEMENTS.........................................................  9










THE INFORMATION IN THIS SAI IS NOT COMPLETE AND MAY BE CHANGED. CLM MAY NOT SELL
THESE SECURITIES UNTIL THE PROXY STATEMENT/PROSPECTUS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS DECLARED EFFECTIVE. THIS SAI IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.






                                  INTRODUCTION

           This SAI is intended to supplement the information provided in the
Proxy Statement/Prospectus dated May 7, 2004 (the "Proxy Statement/Prospectus").
The Proxy Statement/Prospectus has been sent to the stockholders of (1) CLM in
connection with the solicitation of proxies by the Board of Directors to be
voted at the CLM Annual Meeting of Stockholders, (2) PGF in connection with the
solicitation of proxies by the Board of Directors to be voted at the PGF Annual
Meeting, and (3) MGC in connection with the solicitation of proxies by the Board
of Directors to be voted at the MGC Annual Meeting of Stockholders all to be
held on June 10, 2004. This SAI incorporates by reference the Prospectus of PGF
dated as November 9, 1989, and the Fund's Annual Report to Stockholders for the
fiscal year ended December 31, 2003. In addition, this SAI incorporates by
reference the Prospectus of MGC dated as May 7, 1987, and the Fund's Annual
Report to Stockholders for the fiscal year ended December 31, 2003.


                             DESCRIPTION OF THE FUND

         Cornerstone Strategic Value Fund, Inc. (the "Fund" or "CLM") was
incorporated in Maryland on May 1, 1987, under its previous name "Clemente
Global Growth Fund, Inc." and commenced investment operations on June 30, 1987.
On April 20, 2001, the stockholders of the Fund approved a name change whereby
the Fund's official name became "Cornerstone Strategic Value Fund, Inc." The
Fund is registered under the Investment Company of 1940, as amended (the
"Investment Company Act"), as a closed-end, diversified management investment
company and is listed on the American Stock Stock Exchange, LLC ("AMEX") under
the symbol "CLM." CLM seeks long term capital appreciation through investing
primarily in equity securities of U.S. and Foreign companies which Fund
Management believes have demonstrated fundamental investment value and favorable
growth prospects, as determined by Fund Management.

         The authorized capitalization of CLM consists of 25,000,000 shares of
common stock having $0.01 par value per share (the "Shares"). Shares of the Fund
have equal voting rights and liquidation rights. When matters are submitted to
stockholders for a vote, each stockholder is entitled to one vote for each full
Share owned and fractional votes for fractional Shares owned. The Fund holds its
annual meeting of stockholders within 120 days after the end of its fiscal year
which ends on December 31.

         Each Share of CLM represents an equal proportionate interest in the
assets and liabilities belonging to CLM with each other share of CLM and is
entitled to such dividends and distributions out of the income belonging to CLM
as are declared by the Board of Directors (the "Directors"). The Shares do not
have cumulative voting rights or any preemptive or conversion rights. In the
event of the dissolution or liquidation of the Fund, the holders of shares of
the Fund are entitled to share pro rata in the net assets of the Fund available
for distribution to shareholders.




                                      B-1





                   INVESTMENT POLICIES, RISKS AND RESTRICTIONS

         The Proxy Statement/Prospectus presents the investment objective and
the principal investment strategies and risks of the Fund. The investment
objective of the Fund is to seek long term capital appreciation by investing
primarily in U.S. and non-U.S. companies. There can be no assurance that the
Fund will achieve its investment objective. This section supplements the
disclosure in the Fund's Proxy Statement/Prospectus and provides additional
information on the Fund's investment policies and restrictions.

NON-PRINCIPAL INVESTMENT POLICIES

         TEMPORARY DEFENSIVE POSITIONS. The Fund may, from time to time, take
temporary defensive positions that are inconsistent with its principal
investment strategies in attempting to respond to adverse market, economic,
political or other conditions. Such investments include various short-term
instruments. If the Fund takes a temporary defensive position at the wrong time,
the position would have an adverse impact on the Fund's performance and it may
not achieve its investment objective. The Fund reserves the right to invest all
of its assets in temporary defensive positions.

         SECURITIES LENDING. The Fund may lend its portfolio securities to
broker-dealers in amounts equal to no more than 33 1/3% of the Fund's net
assets. These transactions will be fully collateralized at all times with cash
and/or high quality, short-term debt obligations. These transactions involve
risk to the Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the securities lent. In the event
the original borrower defaults on its obligation to return lent securities, the
Fund will seek to sell the collateral, which could involve costs or delays. To
the extent proceeds from the sale of collateral are less than the repurchase
price, the Fund would suffer a loss and you could lose money on your investment.

         BORROWING. The Fund may borrow money from banks, including pursuant to
a revolving line of credit established for the benefit of investment companies
managed by Cornerstone Advisors, for temporary or emergency purposes in order to
meet redemption requests. To reduce its indebtedness, the Fund may have to sell
a portion of its investments at a time when it may be disadvantageous to do so.
In addition, interest paid by the Fund on borrowed funds would decrease the net
earnings of the Fund

         REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
collateralized by the securities in which it may invest. A repurchase agreement
involves the purchase by the Fund of securities with the condition that the
original seller (a bank or broker-dealer) will buy back the same securities
("collateral") at a predetermined price or yield. Repurchase agreements involve
certain risks not associated with direct investments in securities. In the event
the original seller defaults on its obligation to repurchase, the Fund will seek
to sell the collateral, which could involve costs or delays. To the extent
proceeds from the sale of collateral are less than the repurchase price, the
Fund would suffer a loss.



                                      B-2



PRINCIPAL INVESTMENT RISKS

         Please see the Fund's Proxy Statement/Prospectus for additional
information concerning the Principal Investment Risks of the Fund.

INVESTMENT RESTRICTIONS

         The Fund has adopted certain fundamental investment restrictions that
may not be changed without the prior approval of the holders of a majority of
the Fund's outstanding voting securities. For purposes of the restrictions
listed below, all percentage limitations, with the exception of the percentage
limitation listed in 2 below, apply immediately after a purchase or initial
investment, and any subsequent change in any applicable percentage resulting
from market fluctuations does not require elimination of any security from the
Fund's portfolio. Fund policies which are not fundamental may be modified by the
Board of Directors if, in the reasonable exercise of the Board's business
judgment, modification is determined to be necessary or appropriate to carry out
the Fund's objective. Under its fundamental restrictions, the Fund may not:

         1. Invest 25% or more of the total value of its assets in a particular
industry. This restriction does not apply to investments in United States
Government securities.

         2. Issue senior securities, borrow or pledge its assets, except that
the Fund may borrow from a bank for temporary or emergency purposes or for the
clearance of transactions in amounts not exceeding 10% (taken at the lower of
cost or current value) of its total assets (not including the amount borrowed)
and may also pledge its assets to secure such borrowings. Additional investments
will not be made when borrowings exceed 5% of the Fund's assets.

         3. Make short sales of securities or maintain a short position in any
security.

         4. Purchase securities on margin, except such short-term credits as may
be necessary or routine for the clearance or settlement of transactions and the
maintenance of margin with respect to forward contracts or other hedging
transactions.

         5. Underwrite securities of other issuers, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933, as amended, in
selling portfolio securities.

         6. Purchase or sell commodities or real estate, except that the Fund
may invest in securities secured by real estate or interests in real estate or
in securities issued by companies, including real estate investment trusts, that
invest in real estate or interests in real estate, and may purchase and sell
forward contracts on foreign currencies to the extent permitted under applicable
law.

         7. Make investments for the purpose of exercising control over, or
management of, the issuers of any securities.



                                      B-3




                             MANAGEMENT OF THE FUND

         The business and affairs of the Fund are managed under the direction of
the Fund's Board of Directors, and the day-to-day operations are conducted
through or under the direction of the officers of the Fund.

         For information concerning CLM's Directors and Officers, please refer
to CLM's Proxy Statement/Prospectus dated May 7, 2004.

         The Fund has an Audit Committee and a Nominating Committee each of
which is comprised of all of the non-interested members of the Board of
Directors. For additional information concerning the Audit Committee and the
Nominating Committee, please refer to CLM's Proxy Statement/Prospectus dated
May 7, 2004

INVESTMENT ADVISORY AGREEMENT

         The Fund's Board of Directors, including the Directors who are not
interested persons of any party to the Cornerstone Agreement or its affiliates,
recently determined to continue the investment advisory agreement with
Cornerstone Advisors on February 20, 2004, with its legal counsel in attendance.

         In approving the Cornerstone Agreement and determining to submit it to
the stockholders of the Fund for their approval, the Non-Interested members of
the Board of Directors considered many factors, including the nature, quality
and scope of the operations and services to be provided in comparison to other
comparable investment managers, the experience of Cornerstone Advisors, and the
prior experience of Messrs. Bradshaw and Bentz. The Non-Interested members of
the Board of Directors noted that Cornerstone Advisors, Inc. (i) has experience
in providing investment advisory services to closed-end funds, (ii) has
continued to take steps in an effort to reduce the discount at which the Fund's
shares have historically traded at, and (iii) has continued to strive to reduce
CLM's expenses. Furthermore, the Non-Interested members of the Board of
Directors considered the opportunity to obtain comparable services at comparable
costs. Lastly, consideration was given to the fact that there exists no
arrangement or understanding in connection with the Cornerstone Agreement with
respect to the composition of the Board of Directors of the Fund or of
Cornerstone Advisors or with respect to the selection or appointment of any
person to any office of the Fund or Cornerstone Advisors.

CODE OF ETHICS

         PRINCIPAL OFFICERS CODE OF ETHICS

         For additional information concerning the Code of Ethics which applies
to the Fund's principal officers, please refer to CLM's Proxy
Statement/Prospectus dated May 7, 2004.





                                      B-4




         RULE 17J-1 OF THE 1940 ACT

         The Fund and Cornerstone Advisors have adopted a written Code of Ethics
that are compliant with Rule 17j-1 of the Investment Company Act, which permit
personnel covered by the Code of Ethics ("Covered Persons") to invest in
securities, including securities that may be purchased or held by the Fund. The
Code of Ethics also contains provisions designed to address the conflicts of
interest that could arise from personal trading by advisory personnel. The
following are some of the requirements under the Fund's and Cornerstone
Advisors' Code of Ethics: (1) all Covered Persons must report their personal
securities transactions at the end of each quarter; (2) with certain limited
exceptions, all Covered Persons must obtain preclearance before executing any
personal securities transactions; (3) Covered Persons may not execute personal
trades in a security if there are any pending orders in that security by the
respective Fund; and (4) Covered Persons may not invest in initial public
offerings.

         The Board of Directors of the Fund reviews the administration of the
Code of Ethics at least annually and may impose sanctions for violations of the
Code of Ethics. The Codes of Ethics for the Fund and Cornerstone Advisers can be
reviewed and copied either on the EDGAR database on the SEC's website at
http://www.sec.gov or at the Securities Exchange Commission's Public reference
room in Washington, D.C. Information on the operation of the Public Reference
Room may by obtained by calling the SEC at (202) 942-8090.

PROXY VOTING POLICIES AND PROCEDURES

         The Fund provides a voice on behalf of shareholders of the Fund. The
Fund views the proxy voting process as an integral part of the relationship with
the Fund. CLM has entered into an arrangement with Institutional Shareholders
Services ("ISS") whereby ISS votes all of the Fund's portfolio companies proxy
statements and records all of the proxy votes for compilation in the Form N-PX.
The Fund believes that ISS is in a better position to monitor corporate actions,
analyze proxy proposals, make voting decisions and ensure that proxies are
submitted promptly. Therefore, the Fund delegates its authority to vote proxies
to ISS, subject to the supervision of the Board of Trustees. The fundamental
purpose of ISS's Domestic Corporate Governance Policy is to ensure that each
vote will be in a manner that reflects the best interest of the Fund and its
shareholders, and that maximizes the value of the Fund's investment.

MORE INFORMATION

         The actual voting records relating to portfolio securities during the
most recent 12 month period ended June 30 (starting with the year ending June
30, 2004) will be available without charge, upon request by calling toll-free,
1-866-227-3400 or by accessing the SEC's website at WWW.SEC.GOV. In addition, a
copy of the Fund's proxy voting policies and procedures are also available by
calling 1-866-227-3400 and will be sent within three business days of receipt of
a request.



                                      B-5



CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS

         Please refer to CLM's Proxy Statement/Prospectus dated May 7, 2004
for information on this Item.

INVESTMENT MANAGEMENT AND OTHER SERVICES

INVESTMENT ADVISER.

         Please refer to CLM's Proxy Statement/Prospectus dated May 7, 2004,
for additional information concerning CLM's investment adviser.

ADMINISTRATOR.

         Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's
administrator pursuant to an administrative agreement with each Fund. BSFM is
located at 383 Madison Avenue, 23rd Floor, New York, New York 10179.

CUSTODIAN.

         Custodial Trust Company, 101 Carnegie Center, Princeton, New Jersey, is
the custodian for the Fund's assets.

TRANSFER AGENT AND REGISTRAR.

         American Stock Transfer & Trust Co., 59 Maiden Lane, New York, New York
10038 acts as the transfer agent and registrar of the Fund.


                             PORTFOLIO TRANSACTIONS

         Decisions to buy and sell securities for the Fund are made by
Cornerstone Advisors subject to the overall review of the Fund's Board of
Directors. Portfolio securities transactions for the Fund are placed on behalf
of the Fund by persons authorized by Cornerstone Advisors. Cornerstone Advisors
manages other investment companies and accounts that invest in securities.
Although investment decisions for the Fund is made independently from those of
the other accounts, investments of the type the Fund may make may also be made
on behalf of those other accounts. When the Fund and one or more of those other
accounts is prepared to invest in, or desires to dispose of, the same security,
available investments or opportunities for each will be allocated in a manner
believed by Cornerstone Advisors to be equitable. In some cases, this procedure
may adversely affect the price paid or received by the Fund or the size of the
position obtained or disposed of by the Fund.

         Transactions on U.S. and some foreign stock exchanges involve the
payment of negotiated brokerage commissions, which may vary among different
brokers. The cost of securities purchased from underwriters includes an
underwriter's commission or concession, and the prices at which securities are
purchased from and sold to dealers in the over-the-counter markets include an




                                      B-6


undisclosed dealer's mark-up or mark-down. Fixed income securities are generally
traded on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security will likely
include a profit to the dealer.

         In selecting brokers or dealers to execute portfolio transactions on
behalf of the Fund, Cornerstone Advisors will seek the best overall terms
available. The Advisory Agreement provides that, in assessing the best overall
terms available for any transaction, Cornerstone Advisors will consider the
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer and the reasonableness of the commission, if any, for the
specific transaction and on a continuing basis. In addition, the Advisory
Agreement authorizes Cornerstone Advisors in selecting brokers or dealers, to
execute a particular transaction and in evaluating the best overall terms
available, to consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Fund and/or other accounts over which Cornerstone Advisors exercises investment
discretion. The fees payable under the Advisory Agreements are not reduced as a
result of Cornerstone Advisors receiving such brokerage and research services.

         The Board of Directors of the Fund will review periodically the
commissions paid by that Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the benefits
inuring to such Fund.

         The aggregate amounts paid by CLM in brokerage commissions for the
fiscal years ended December 31, 2001, 2002 and 2003 were $69,714, $18,188 and
$13,413, respectively. None of the brokerage commissions paid by CLM were paid
to affiliated brokers.

                  DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

         For information concerning the Dividend Reinvestment and Cash Purchase
Plan, please see CLM's Proxy Statement/Prospectus dated May 7, 2004.

                                    TAXATION

         The following is a summary of certain material United States federal
income tax considerations regarding the purchase, ownership and disposition of
shares in the Fund. Each prospective shareholder is urged to consult his or her
own tax adviser with respect to the specific federal, state, local and foreign
tax consequences of investing in the Fund. The summary is based on the laws in
effect on the date of this SAI, which are subject to change.

         The Fund has qualified and elected to be treated as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"), and intends to continue to so qualify, which requires compliance with
certain requirements concerning the sources of its income, diversification of
its assets, and the amount and timing of its distributions to shareholders. Such
qualification does not involve supervision of management or investment practices
or policies by any government agency or bureau. By so qualifying, the Fund will
not be subject to federal income or excise tax on its net investment income or



                                      B-7


net capital gain which are distributed to shareholders in accordance with the
applicable timing requirements. Net investment income and net capital gain of
the Fund will be computed in accordance with Section 852 of the Code.

         The Fund intends to distribute all of its net investment income, any
excess of net short-term capital gains over net long-term capital losses, and
any excess of net long-term capital gains over net short-term capital losses in
accordance with the timing requirements imposed by the Code and therefore will
not be required to pay any federal income or excise taxes. Distributions of net
investment income and net capital gain will be made no later than December 31 of
each year. Both types of distributions will be in shares of the Fund unless a
shareholder elects to receive cash.

         If the Fund fails to qualify as a regulated investment company under
Subchapter M in any fiscal year, it will be treated as a corporation for federal
income tax purposes. As such the Fund would be required to pay income taxes on
its net investment income and net realized capital gains, if any, at the rates
generally applicable to corporations. Shareholders of the a Fund would not be
liable for income tax on the Fund's net investment income or net realized
capital gains in their individual capacities. Distributions to shareholders,
whether from the Fund's net investment income or net realized capital gains,
would be treated as taxable dividends to the extent of current or accumulated
earnings and profits of the Fund.

         The Fund is subject to a 4% nondeductible excise tax on certain
undistributed amounts of ordinary income and capital gain under a prescribed
formula contained in Section 4982 of the Code. The formula requires payment to
shareholders during a calendar year of distributions representing at least 98%
of the Fund's ordinary income for the calendar year and at least 98% of its
capital gain net income (i.e., the excess of its capital gains over capital
losses) realized during the one-year period ending October 31 during such year
plus 100% of any income that was neither distributed nor taxed to the Fund
during the preceding calendar year. Under ordinary circumstances, the Fund
expects to time its distributions so as to avoid liability for this tax.

         Net investment income is made up of dividends and interest less
expenses. Net capital gain for a fiscal year is computed by taking into account
any capital loss carryforward of the Fund.

         The following discussion of tax consequences is for the general
information of shareholders that are subject to tax. Shareholders that are IRAs
or other qualified retirement plans are exempt from income taxation under the
Code.

         Distributions of taxable net investment income and the excess of net
short-term capital gain over net long-term capital loss are taxable to
shareholders as ordinary income.

         Distributions of net capital gain ("capital gain dividends") are
taxable to shareholders as long-term capital gain, regardless of the length of
time the shares of the Fund have been held by such shareholders.




                                      B-8



         Distributions of taxable net investment income and net capital gain
will be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date.

         All distributions of taxable net investment income and net capital
gain, whether received in shares or in cash, must be reported by each taxable
shareholder on his or her federal income tax return. Dividends or distributions
declared in October, November or December as of a record date in such a month,
if any, will be deemed to have been received by shareholders on December 31, if
paid during January of the following year. Redemptions of shares may result in
tax consequences (gain or loss) to the shareholder and are also subject to these
reporting requirements.

         Under the Code, the Fund will be required to report to the Internal
Revenue Service all distributions of taxable income and capital gains, except in
the case of certain exempt shareholders. Under the backup withholding provisions
of Section 3406 of the Code, distributions of taxable net investment income and
net capital gain may be subject to withholding of federal income tax at the rate
of 30.5% in the case of non-exempt shareholders who fail to furnish the
investment company with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law, or if
the Fund is notified by the IRS or a broker that withholding is required due to
an incorrect TIN or a previous failure to report taxable interest or dividends.
If the withholding provisions are applicable, any such distributions and
proceeds, whether taken in cash or reinvested in additional shares, will be
reduced by the amounts required to be withheld.

         Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund.

         A brief explanation of the form and character of the distribution
accompany each distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions.

THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES AFFECTING
THE FUNDS AND THEIR SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF AN
INVESTMENT IN EITHER FUND.



                                      B-9



                              FINANCIAL STATEMENTS


(a)      The Financial Statements required under this Item are incorporated by
         reference herein from the

1.       Cornerstone Strategic Value Fund, Inc. Annual Report for the period
         ended December 31, 2001, filed with the Securities and Exchange
         Commission on March 6, 2002 (File No. 811-5150).

2.       Cornerstone Strategic Value Fund, Inc. Annual Report for the period
         ended December 31, 2002, filed with the Securities and Exchange
         Commission on February 28, 2003 (File No. 811-5150).

3.       Cornerstone Strategic Value Fund, Inc. Annual Report for the period
         ended December 31, 2003, filed with the Securities and Exchange
         Commission on March 8, 2004 (File No. 811-5150).

4.       Progressive Return Fund, Inc.'s Annual Report for the period ended
         December 31, 2001, filed with the Securities and Exchange Commission on
         March 6, 2002 (File No. 811-5891).

5.       Progressive Return Fund, Inc.'s Annual Report for the period ended
         December 31, 2001, as filed with the Securities and Exchange Commission
         on February 28, 2003 (File No. 811-5891).

6.       Progressive Return Fund, Inc.'s Annual Report for the period ended
         December 31, 2003, as filed with the Securities and Exchange Commission
         on March 8, 2004 (File No. 811-5891).

7.       Investors First Fund, Inc. Annual Report for the period ended December
         31, 2001, filed with the Securities and Exchange Commission on February
         28, 2002 (File No. 811-04981).

8.       Investors First Fund, Inc. Annual Report for the period ended December
         31, 2002, filed with the Securities and Exchange Commission on March 3,
         2003 (File No. 811-04981).

9.       Investors First Fund, Inc. Annual Report for the period ended December
         31, 2003, filed with the Securities and Exchange Commission on March
         10, 2004 (File No. 811-04981).

(b)      Pro Forma Financial Information

         The following table represents the pro forma financial information
based upon the December 31, 2003 audited financial statements that are included
in each Fund's Annual Report to Stockholders.




                                      B-10








Statement of Operations
For the Year ended December 31, 2003 (unaudited)

                                                  CLM                                          Acquiring Fund
                                             Acquiring Fund        PGF        Adjustments         Pro Forma
Investment Income
Income:
                                                                                   
     Interest                                    461,054         438,724            --         $    899,778
     Dividends                                     2,379           4,064            --                6,443
                                               ---------       ---------      ----------       ------------

Total Investment Income                          463,433         442,788            --              906,221
                                               ---------       ---------      ----------       ------------

Expenses:
     Investment advisory fees                    246,113         240,927          37,666(c)         524,706(c)
     Audit fees                                   13,000          13,000         (11,000)(d)         15,000
     Legal fees                                    3,730           4,340           3,930(d)          12,000
     Administration fees                          50,000          50,000         (47,529)(e)         52,471
     Custodian fees                                5,970           4,921           1,220(f)          12,111
     Printing                                       --               781          19,219(g)          20,000
     Accounting fees                              28,413          25,682         (20,833)(h)         33,262
     Directors' fees                              13,697          15,098          (4,295)(d)         24,500
     Transfer agent fees                          14,510          18,537          (4,667)(d)         28,380
     Stock Exchange listing fees                  10,359          14,374         (17,733)(d)          7,000
     Insurance                                     4,604           5,214            (618)(d)          9,200
     Other                                           301             533           1,766(d)           2,600
                                               ---------       ---------      ----------       ------------
Total Expenses                                   390,697         393,407         (42,875)           741,229
                                               ---------       ---------      ----------       ------------
Less:  Fee paid indirectly                       (13,413)         (9,030)                           (22,443)
Less:  Fee waivers                               (82,098)        (96,295)         89,250(i)         (89,143)
                                               ---------       ---------      ----------       ------------
Net Expenses                                     295,186         288,082                            629,643
                                               ---------       ---------                       ------------

Net Investment Income                            168,247         154,706         (42,875)           276,578
                                               ---------       ---------      ----------       ------------

Net Realized and Unrealized Gain/(Loss)
   on Investments and Foreign
   Currency Related Transaction
Net realized gain/(loss) from Investments       (231,146)       (258,139)                          (489,285)
Net change in unrealized appreciation/
   (depreciation) in value of investments      5,737,591       5,898,393                         11,635,984
                                               ---------       ---------                       ------------

Net realized and unrealized gain/(loss)
   on investments                              5,506,445       5,640,254                         11,146,699
                                               ---------       ---------                       ------------

NET INCREASE IN NET ASSETS RESULTING
   FROM OPERATIONS                             5,674,692       5,794,960         (42,875)        11,423,277
                                               ---------       ---------      ----------       ------------







                                      B-11











The Cornerstone Strategic Value Fund, Inc.
Progressive Return Fund, Inc.
Notes to Pro Forma Financial Statements (unaudited)

1.     Basis of Combination

       The unaudited Pro Forma Condensed Portfolio of Investments, Pro Forma
Condensed Statement of Assets and Liabilities and Pro Forma Condensed Statement
of Operations give effect to the proposed merger of Progressive Return Fund,
Inc.(PGF) into The Cornerstone Strategic Value Fund, Inc. ("CLM"). The proposed
merger will be accounted for by the method of accounting for tax-free mergers of
investment companies (sometimes referred to as the pooling-of-interest basis).
The Merger provides for the transfer of all or substantially all of the assets
of PGF to CLM in exchange for CLM common shares, the distribution of such CLM
common shares to common shareholders of PGF and the subsequent liquidation of
PGF. Each share of common stock of PGF will convert into an equivalent dollar
amount of full shares of common stock of CLM based on the net asset value per
share of each Fund.

       The pro forma combined statements should be read in conjunction with the
historical financial statements of the constituent Fund and the notes thereto
incorporated by reference in the Registration Statement filed on Form N-14.

       CLM is a closed-end, diversified and PGF is a closed-end non-diversified
Management investment companies registered under the Investment Company Act of
1940, as amended.

     Pro Forma Adjustments:

     The Pro Forma adjustments below reflect the impact of the merger between
CLM and PGF.

(a) To remove certain prepaid expenses associated with PGF, in the statement of
    assets and liabilities, which will not be assumed by CLM.

(b) In connection with PGF's intention to merge with CLM; PGF reclass its
    treasury shares held to paid-in capital.

(c) Adjustment based on contractual agreement with Investment Manager.

(d) Assumes the elimination of duplicative charges resulting from the
    combination and reflects management's estimates of combined pro forma
    operations.

(e) Adjustment based on the contractual agreement with the Administrator for the
    combined Fund.

(f) Adjustment based on the contractual agreement with the custodian for the
    combined Fund.

(g) Assumes shareholders' meeting fees are combined with printing and reflects
    management's estimates of combined pro forma operations.

(h) Adjustment based on the contractual agreement with the Accounting fees for
    the combined Fund.

(i) The Investment Manager voluntarily waives its management fees to the extent
    that the Fund's monthly operating expenses exceed 0.10% of net assets
    calculated on a monthly basis.



                                      B-12





       2. SIGNIFICANT ACCOUNTING POLICIES

       The following is a summary of significant accounting policies, which are
consistently followed by each of PGF and CLM in the preparation of its financial
statements.

       MANAGEMENT ESTIMATES: The preparation of financial statements in
accordance with accounting principles generally accepted in the United States of
America requires management to make certain estimates and assumptions that may
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.

         PORTFOLIO VALUATION: Investments are stated at value in the
accompanying financial statements. All equity securities are valued at the
closing price on the exchange or market on which the security is primary traded
("Primary Market"). If the security did not trade on the Primary Market, it
shall be valued at the closing price on another exchange where it trades. If
there is no such sale prices, the value shall be the most recent bid, and if
there is no bid, the security shall be valued at the most recent asked. If no
pricing service is available and there are more than two dealers, the value
shall be the mean of the highest bid and lowest ask. If there is only one
dealer, then the value shall be the mean if bid and ask are available, otherwise
the value shall be the bid. All other securities and assets are valued as
determined in good faith by the Board of Directors. Short-term investments
having a maturity of 60 days or less are valued on the basis of amortized cost.
The Board of Directors has established general guidelines for calculating fair
value of not readily marketable securities. The net asset value per share of
each Fund is calculated weekly and on the last business day of the month with
the exception of those days on which the New York Stock Exchange is closed.

       INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions
are accounted for on the trade date. The cost of investments sold is determined
by use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.

       TAXES: No provision is made for U.S. federal income or excise taxes as it
is each Fund's intention to continue to qualify as a regulated investment
company and to make the requisite distributions to its shareholders which will
be sufficient to relieve it from all or substantially all U.S. federal income
and excise taxes.

       DISTRIBUTIONS OF INCOME AND GAINS: Each Fund distributes at least
annually to shareholders, substantially all of its net investment income and net
realized short-term capital gains, if any. Each Fund determines annually whether
to distribute any net realized long-term capital gains in excess of net
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by each Fund on the ex-dividend date.



                                      B-13



       The board of Directors of each Fund may, if it it determined to be in the
best interest of each Fund and its shareholders, time to time authorize and
declare distribution that may be substantially characterized as a return of
capital.

       The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
U.S. federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.

       OTHER: Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.





















                                      B-14






Statement of Assets and Liabilities
At December 31, 2003 (unaudited)
                                                                                                            Acquiring Fund
                                               CLM Acquiring Fund                 PGF            Adjust-       Pro Forma
ASSETS                                        Cost          Value          Cost         Value      ments   Cost         Value
                                              ----          -----          ----         -----    -------   ----         -----
                                                                                                   
Investments, at value                      24,461,195    26,575,649    29,275,719    26,067,548            53,736,914   52,643,197
Cash collateral received
   for securities loaned                                    491,232                     441,178                            932,410
Receivables:
     Securities Sold                                           --                         --                                  --
     Interest                                                   176                      36,023                             36,199
     Dividends                                               34,112                         112                             34,224
Prepaid expenses and other
   assets                                                       877                         671     (671)(a)                   877
                                                         ----------                  ----------                         ----------
Total Assets                                             27,102,046                  26,545,532                         53,646,907
                                                         ----------                  ----------                         ----------

LIABILITIES
Payables:
     Upon return of securities
       loaned                                               491,232                     441,178                            932,410
     Investment advisory fee                                 15,332                      17,148                             32,480
     Other accrued expenses                                  30,175                      31,294                             61,469
                                                         ----------                  ----------                         ----------
Total Liabilities                                           536,739                     489,620                          1,026,359
                                                         ----------                  ----------                         ----------

Net Assets                                               26,565,307                  26,055,912                         52,620,548
                                                         ----------                  ----------                         ----------

Net Assets Consist Of:
     Capital stock, $0.01 par value;
        3,849,524 shares issued and
        outstanding for CLM (25,000,000
        shares authorized) and
        $0.001 par value; 1,167,477
        shares issued and outstanding
        for PGF (100,000,000
        shares authorized)                                   38,495                       1,167                             39,662
     Paid-in-capital                                     52,228,222                  42,839,458 (173,074)(a)(b)         94,894,606
     Cost of 2,239,440 and 9,093
        shares repurchased,
        respectively                                    (26,999,661)                   (172,403) 172,403(b)            (26,999,661)
     Accumulated net realized
       loss on investments                                 (816,203)                (13,404,139)                       (14,220,342)
     Net unrealized appreciation
      in value of investments                             2,114,454                  (3,208,171)                        (1,093,717)
                                                         ----------                  ----------                         ----------
                                                         26,565,307                  26,055,912                         52,620,548
                                                         ----------                  ----------                         ----------







                                      B-15








Statement of Operations
For the Year ended December 31, 2003 (unaudited)

                                         CLM                                                          Acquiring Fund
                                   Acquiring Fund       MGC             PGF         Adjustments         Pro Forma
Investment Income
Income:
                                                                                       
     Dividends                     $    461,054    $    283,535    $    438,724            --         $  1,183,313
     Interest                             2,379          33,741           4,064                             40,184
                                   ------------    ------------    ------------      ----------       ------------

Total Investment Income                 463,433         317,276         442,788                          1,223,497
                                   ------------    ------------    ------------      ----------       ------------

Expenses:
     Investment advisory fees           246,113         966,400         240,927         152,675(c)       1,606,115(c)
     Audit fees                          13,000          17,000          13,000         (26,000)(d)         17,000
     Legal fees                           3,730         783,138           4,340        (766,208)(d)         25,000
     Administration fees                 50,000          68,623          50,000          (8,011)(e)        160,612
     Custodian fees                       5,970          17,679           4,921           1,762(f)          30,332
     Printing                              --           156,683             781        (115,464)(g)         42,000
     Accounting fees                     28,413           8,196          25,682         (19,416)(h)         42,875
     Directors' fees                     13,697         221,498          15,098        (225,293)(d)         25,000
     Transfer agent fees                 14,510          39,445          18,537         (36,492)(d)         36,000
     Stock Exchange listing fees         10,359            --            14,374         (18,733)(d)          6,000
     Insurance                            4,604           3,275           5,214          (1,093)(d)         12,000
     Other                                  301          23,952             533         (19,786)(d)          5,000
                                   ------------    ------------    ------------      ----------       ------------
Total Expenses                          390,697       2,305,889         393,407      (1,082,059)         2,007,934
                                   ------------    ------------    ------------      ----------       ------------
Less:  Fee paid indirectly              (13,413)           --            (9,030)                           (22,443)
Less:  Fee waivers                      (82,098)           --           (96,295)        120,240(i)         (58,153)
                                   ------------    ------------    ------------      ----------       ------------
Net Expenses                            295,186       2,305,889         288,082        (961,819)         1,927,338
                                   ------------    ------------    ------------      ----------       ------------

Net Investment Income                   168,247      (1,988,613)        154,706         961,819           (703,841)
                                   ------------    ------------    ------------      ----------       ------------

Net Realized and Unrealized
  Gain/(Loss) on Investments
  and Foreign Currency
  Related Transaction
Net realized gain/(loss)
  from Investments                     (231,146)     (1,612,545)       (258,139)                        (2,101,830)
Net change in unrealized
  appreciation/(depreciation)
  in value of investments             5,737,591      24,904,617       5,898,393                         42,438,994
                                   ------------    ------------    ------------                       ------------

Net realized and unrealized
  gain/(loss) on investments          5,506,445      23,292,072       5,640,254                         40,337,164
                                   ------------    ------------    ------------                       ------------

NET INCREASE IN NET ASSETS
  RESULTING FROM OPERATIONS           5,674,692      21,303,459       5,794,960         961,819         39,633,323
                                   ------------    ------------    ------------      ----------       ------------




                                      B-16




Cornerstone Strategic Value Fund, Inc.
Investor First Fund, Inc.
Progressive Return Fund, Inc.
Notes to Pro Forma Financial Statements (unaudited)

1.     Basis of Combination

         The unaudited Pro Forma Condensed Portfolio of Investments, Pro Forma
Condensed Statement of Assets and Liabilities and Pro Forma Condensed Statement
of Operations give effect to the proposed merger of Investor First Fund, Inc.
("MGC")and Progressive Return Fund, Inc.("PGF") into The Cornerstone Strategic
Value Fund, Inc. ("CLM"). The proposed merger will be accounted for by the
method of accounting for tax-free mergers of investment companies (sometimes
referred to as the pooling-of-interest basis). The Merger provides for the
transfer of all or substantially all of the assets of MGC and PGF to CLM in
exchange for CLM common shares, the distribution of such CLM common shares to
common shareholders of MGC and PGF and the subsequent liquidation of MGC and
PGF. Each share of common stock of MGC and PGF will convert into an equivalent
dollar amount of full shares of common stock of CLM based on the net asset value
per share of each Fund.

       The pro forma combined statements should be read in conjunction with the
historical financial statements of the constituent Fund and the notes thereto
incorporated by reference in the Registration Statement filed on Form N-14.

       CLM and MGC are closed-end, diversified and PGF is closed-end
non-diversified management investment companies registered under the
Investment Company Act of 1940, as amended.

     Pro Forma Adjustments:

     The Pro Forma adjustments below reflect the impact of the merger between
CLM, MGC and PGF.

(a)  To remove certain prepaid expenses associated with MGC and PGF, in the
     statement of assets and liabilities, which will not be assumed by CLM.

(b)  In connection with PGF's intention to merge with CLM; PGF reclass its
     treasury shares held to paid-in capital.

(c)  Adjustment based on contractual agreement with Investment Manager.

(d)  Assumes the elimination of duplicative charges resulting from the
     combination and reflects management's estimates of combined pro forma
     operations.

(e)  Adjustment based on the contractual agreement with the Administrator for
     the combined Fund.

(f)  Adjustment based on the contractual agreement with the Custodian for the
     combined Fund.

(g)  Assumes shareholders' meeting fees are combined with printing and reflects
     management's estimates of combined pro forma operations.

(h)  Adjustment based on the contractual agreement with the Accounting Agent for
     the combined Fund.

(i)  The Investment Manager voluntarily waives its management fees to the extent
     that the Fund's monthly operating expenses exceed 0.10% of net assets
     calculated on a monthly basis.


                                      B-17



       2.     SIGNIFICANT ACCOUNTING POLICIES

         The following is a summary of significant accounting policies, which
are consistently followed by each of CLM, MGC and PGF in the preparation of its
financial statements.

       MANAGEMENT ESTIMATES: The preparation of financial statements in
accordance with accounting principles generally accepted in the United States
of America requires management to
make certain estimates and assumptions that may affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those
estimates.

         PORTFOLIO VALUATION: Investments are stated at value in the
accompanying financial statements. All equity securities are valued at the
closing price on the exchange or market on which the security is primary traded
("Primary Market"). If the security did not trade on the Primary Market, it
shall be valued at the closing price on another exchange where it trades. If
there is no such sale prices, the value shall be the most recent bid, and if
there is no bid, the security shall be valued at the most recent asked. If no
pricing service is available and there are more than two dealers, the value
shall be the mean of the highest bid and lowest ask. If there is only one
dealer, then the value shall be the mean if bid and ask are available, otherwise
the value shall be the bid. All other securities and assets are valued as
determined in good faith by the Board of Directors. Short-term investments
having a maturity of 60 days or less are valued on the basis of amortized cost.
The Board of Directors has established general guidelines for calculating fair
value of not readily marketable securities. The net asset value per share of
each Fund is calculated weekly and on the last business day of the month with
the exception of those days on which the New York Stock Exchange is closed.

       INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions
are accounted for on the trade date. The cost of investments sold is determined
by use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.

       TAXES: No provision is made for U.S. federal income or excise taxes as it
is each Fund's intention to continue to qualify as a regulated investment
company and to make the requisite distributions to its shareholders which will
be sufficient to relieve it from all or substantially all U.S. federal income
and excise taxes.

       DISTRIBUTIONS OF INCOME AND GAINS: Each Fund distributes at least
annually to shareholders, substantially all of its net investment income and net
realized short-term capital gains, if any. Each Fund determines annually whether
to distribute any net realized long-term capital gains in excess of net
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by each Fund on the ex-dividend date.





                                      B-18



       The board of Directors of each Fund may, if it it determined to be in
the best interest of each Fund and its shareholders, time to time authorize
and declare distribution that may be substantially characterized as a
return of capital.

       The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
U.S. federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.

       OTHER: Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.















                                      B-19







Statement of Assets and Liabilities
At December 31, 2003 (unaudited)

                                           CLM Acquiring Fund                   MGC                                  PGF
ASSETS                                   Cost            Value           Cost           Value                 Cost         Value
------                                   ----            -----           ----           -----                 ----         -----
                                                                                                       
Investments, at value                 24,461,195      26,575,649      83,493,540     108,693,843            29,275,719   26,067,548
Cash collateral received
  for securities loaned                                  491,232                      25,249,487                            441,178
Receivables:
     Securities Sold                                        --                           229,896                              --
     Interest                                                176                           5,420                             36,023
     Dividends                                            34,112                          42,846                                112
Prepaid expenses and
  other assets                                               877                          16,377                                671
                                                     -----------                     -----------                        -----------
Total Assets                                          27,102,046                     134,237,869                         26,545,532
                                                     -----------                     -----------                        -----------

LIABILITIES
Payables:
     Upon return of securities
       loaned                                            491,232                      25,249,487                            441,178
     Investment advisory fee                              15,332                         110,198                             17,148
     Other accrued expenses                               30,175                         601,453                             31,294
                                                     -----------                     -----------                        -----------
Total Liabilities                                        536,739                      25,961,138                            489,620
                                                     -----------                     -----------                        -----------

Net Assets                                            26,565,307                     108,276,731                         26,055,912
                                                     -----------                     -----------                        -----------

Net Assets Consist Of:
     Capital stock, $0.01 par
      value; 3,849,524 shares
      issued and outstanding
      for CLM (25,000,000 shares
      authorized) and $0.001
      par value; 1,167,477 shares
      issued and outstanding for
     PGF (100,000,000 shares
     authorized)                                          38,495                         --                                   1,167
     Paid-in-capital ($0.01 par
       value; 9,860,115 shares
       issued and outstanding;
       150,000,000 shares
       authorized for MGC)                            52,228,222                      85,386,540                         42,839,458
    Cost of 2,239,440, 0 and
       9,093 shares repurchased,
       respectively                                  (26,999,661)                        --                                (172,403)
     Accumulated net realized
       loss on investments                              (816,203)                     (2,310,112)                       (13,404,139)
     Net unrealized appreciation
       in value of investments                         2,114,454                      25,200,303                         (3,208,171)
                                                     -----------                     -----------                        -----------
                                                      26,565,307                     108,276,731                         26,055,912
                                                     -----------                     -----------                        -----------



                                                         Acquiring Fund
                                                             Pro Forma
                                     Adjustments        Cost           Value
                                     -----------        ----           -----




Investments, at value                                137,230,454    161,337,040
Cash collateral received
  for securities loaned                                              26,181,897
Receivables:
     Securities Sold                                                    229,896
     Interest                                                            41,619
     Dividends                                                           77,070
Prepaid expenses and
  other assets                        (17,048)(a)                           877
                                                                    -----------
Total Assets                                                        187,868,399
                                                                    -----------

LIABILITIES
Payables:
     Upon return of securities
       loaned                                                        26,181,897
     Investment advisory fee                                            142,678
     Other accrued expenses                                             662,922
                                                                    -----------
Total Liabilities                                                    26,987,497
                                                                    -----------

Net Assets                                                          160,880,902
                                                                    -----------

Net Assets Consist Of:
     Capital stock, $0.01 par
      value; 3,849,524 shares
      issued and outstanding
      for CLM (25,000,000 shares
      authorized) and $0.001
      par value; 1,167,477 shares
      issued and outstanding for
     PGF (100,000,000 shares
     authorized)                                                         39,662
     Paid-in-capital ($0.01 par
       value; 9,860,115 shares
       issued and outstanding;
       150,000,000 shares
       authorized for MGC)           (189,451)(a)(b)                180,264,769
    Cost of 2,239,440, 0 and
       9,093 shares repurchased,
       respectively                   172,403(b)                    (26,999,661)
     Accumulated net realized
       loss on investments                                          (16,530,454)
     Net unrealized appreciation
       in value of investments                                       24,106,586
                                                                    -----------
                                                                    160,880,902
                                                                    -----------





                                      B-20










Statement of Operations
For the Year ended December 31, 2003 (unaudited)

                                       CLM                                       Acquiring Fund
                                   Acquiring Fund       MGC        Adjustments      Pro Forma
                                   --------------       ---        -----------      ---------
Investment Income
Income:
                                                                        
     Dividends                         461,054        283,535           --             744,589
     Interest                            2,379         33,741           --              36,120
                                       -------      ---------       --------         ---------

Total Investment Income                463,433        317,276           --             780,709
                                       -------      ---------       --------         ---------

Expenses:
     Investment advisory fees          246,113        966,400        133,821(b)      1,346,334(b)
     Audit fees                         13,000         17,000        (15,000)(c)        15,000
     Legal fees                          3,730        783,138       (763,868)(c)        23,000
     Administration fees                50,000         68,623         16,010(d)        134,633
     Custodian fees                      5,970         17,679          2,786(e)         26,435
     Printing                             --          156,683       (118,683)(f)        38,000
     Accounting fees                    28,413          8,196          4,869(g)         41,478
     Directors' fees                    13,697        221,498       (210,695)(c)        24,500
     Transfer agent fees                14,510         39,445        (19,955)(c)        34,000
     Stock Exchange listing fees        10,359           --             (359)(c)        10,000
     Insurance                           4,604          3,275          3,121(c)         11,000
     Other                                 301         23,952        (20,753)(c)         3,500
                                       -------      ---------       --------         ---------
Total Expenses                         390,697      2,305,889       (988,705)        1,707,881
                                       -------      ---------       --------         ---------
Less:  Fee paid indirectly             (13,413)          --                            (13,413)
Less:  Fee waivers                     (82,098)          --            3,231(h)        (78,867)
                                       -------      ---------       --------         ---------
Net Expenses                           295,186      2,305,889       (985,474)        1,615,601
                                       -------      ---------       --------         ---------

Net Investment Income                  168,247     (1,988,613)       985,474          (834,892)
                                       -------      ---------       --------         ---------

Net Realized and Unrealized
  Gain/(Loss) on Investments
  and Foreign Currency Related
  Transaction
Net realized gain/(loss) from
  Investments                         (231,146)    (1,612,545)                      (1,843,691)
Net change in unrealized
  appreciation/(depreciation)
  in value of investments            5,737,591     24,904,617                       30,642,208
                                     ---------     ----------                       ----------

Net realized and unrealized
  gain/(loss) on investments         5,506,445     23,292,072                       28,798,517
                                     ---------     ----------                       ----------

NET INCREASE IN NET ASSETS
  RESULTING FROM OPERATIONS          5,674,692     21,303,459        985,474        27,963,625
                                     ---------     ----------       --------        ----------



                                      B-21



The Cornerstone Strategic Value Fund, Inc.
Investor First Fund, Inc.
Notes to Pro Forma Financial Statements (unaudited)

1.     Basis of Combination

       The unaudited Pro Forma Condensed Portfolio of Investments, Pro Forma
Condensed Statement of Assets and Liabilities and Pro Forma Condensed
Statement of Operations give effect to the proposed merger of Investor First
Fund, Inc. (MGC) into The Cornerstone Strategic Value Fund, Inc.
("CLM"). The proposed merger will be accounted for by the method of
accounting for tax-free mergers of investment companies (sometimes referred
to as the pooling-of-interest basis). The Merger provides
for the transfer of all or substantially all of the assets of MGC to CLM in
exchange for CLM common shares, the distribution of such CLM common shares to
common shareholders of MGC and the subsequent liquidation of MGC. Each share
of common stock of MGC will convert into an equivalent dollar amount of full
shares of common stock of CLM based on the net asset value per share of each
Fund.

       The pro forma combined statements should be read in conjunction with the
historical financial statements of the constituent Fund and the notes thereto
incorporated by reference in the Registration Statement filed on Form N-14.

       CLM and MGC are both closed-end, diversified management investment
companies registered under the Investment Company Act of 1940, as amended.

     Pro Forma Adjustments:

     The Pro Forma adjustments below reflect the impact of the merger between
CLM and MGC.

(a)  To remove certain prepaid expenses associated with MGC, in the statement of
     assets and liabilities, which will not be assumed by CLM.

(b)  Adjustment based on contractual agreement with Investment Manager.

(c)  Assumes the elimination of duplicative charges resulting from the
     combination and reflects management's estimates of combined pro forma
     operations.

(d)  Adjustment based on the contractual agreement with the Administrator for
     the combined Fund.

(e)  Adjustment based on the contractual agreement with the custodian for the
     combined Fund.

(f)  Assumes shareholders' meeting fees are combined with printing and reflects
     management's estimates of combined pro forma operations.

(g)  Adjustment based on the contractual agreement with the Accounting fees for
     the combined Fund.

(h)  The Investment Manager voluntarily waives its management fees to the extent
     that the Fund's monthly operating expenses exceed 0.10% of net assets
     calculated on a monthly basis.


                                      B-22





       2.     SIGNIFICANT ACCOUNTING POLICIES

       The following is a summary of significant accounting policies, which are
consistently followed by each of CLM and MGC in the preparation of its financial
statements.

       MANAGEMENT ESTIMATES: The preparation of financial statements in
accordance with accounting principles generally accepted in the United States
of America requires management to
make certain estimates and assumptions that may affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those
estimates.

         PORTFOLIO VALUATION: Investments are stated at value in the
accompanying financial statements. All equity securities are valued at the
closing price on the exchange or market on which the security is primary traded
("Primary Market"). If the security did not trade on the Primary Market, it
shall be valued at the closing price on another exchange where it trades. If
there is no such sale prices, the value shall be the most recent bid, and if
there is no bid, the security shall be valued at the most recent asked. If no
pricing service is available and there are more than two dealers, the value
shall be the mean of the highest bid and lowest ask. If there is only one
dealer, then the value shall be the mean if bid and ask are available, otherwise
the value shall be the bid. All other securities and assets are valued as
determined in good faith by the Board of Directors. Short-term investments
having a maturity of 60 days or less are valued on the basis of amortized cost.
The Board of Directors has established general guidelines for calculating fair
value of not readily marketable securities. The net asset value per share of
each Fund is calculated weekly and on the last business day of the month with
the exception of those days on which the New York Stock Exchange is closed.

       INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions
are accounted for on the trade date. The cost of investments sold is determined
by use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.

       TAXES: No provision is made for U.S. federal income or excise taxes as it
is each Fund's intention to continue to qualify as a regulated investment
company and to make the requisite distributions to its shareholders which will
be sufficient to relieve it from all or substantially all U.S. federal income
and excise taxes.

       DISTRIBUTIONS OF INCOME AND GAINS: Each Fund distributes at least
annually to shareholders, substantially all of its net investment income and net
realized short-term capital gains, if any. Each Fund determines annually whether
to distribute any net realized long-term capital gains in excess of net
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by each Fund on the ex-dividend date.




                                      B-23



       The board of Directors of each Fund may, if it it determined to be in
the best interest of each Fund and its shareholders, time to time authorize
and declare distribution that may be substantially characterized as a
return of capital.

       The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
U.S. federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.

       OTHER: Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.



















                                      B-24





Statement of Assets and Liabilities
At December 31, 2003 (unaudited)

                                             CLM Acquiring Fund                     MGC
ASSETS                                      Cost         Value             Cost              Value         Adjustments
------                                      ----         -----             ----              -----         -----------
                                                                                           
Investments, at value                    24,461,195     26,575,649      83,493,540        108,693,843
Cash collateral received
  for securities loaned                                    491,232                         25,249,487
Receivables:
     Securities Sold                                          --                              229,896
     Interest                                                  176                              5,420
     Dividends                                              34,112                             42,847
Prepaid expenses and
  other assets                                                 877                             16,377         (16,377)(a)
                                                       -----------                        -----------
Total Assets                                            27,102,046                        134,237,870
                                                       -----------                        -----------

LIABILITIES
Payables:
     Upon return of securities
       loaned                                              491,232                         25,249,487
     Investment advisory fee                                15,332                            110,198
     Other accrued expenses                                 30,175                            601,454
                                                       -----------                        -----------
Total Liabilities                                          536,739                         25,961,139
                                                       -----------                        -----------

Net Assets                                              26,565,307                        108,276,731
                                                       -----------                        -----------

Net Assets Consist Of:
     Capital stock, $0.01 par value;
        3,849,524 shares issued
        and outstanding for CLM
       (25,000,000 shares authorized)                       38,495                             --
     Paid-in-capital ($0.01 par value;
       9,860,115 shares issued and
       outstanding; 150,000,000 shares
       authorized for MGC)                              52,228,222                         85,386,540         (16,997)(a)
     Cost of 2,239,440, and 0 shares
       repurchased, respectively                       (26,999,661)                            --
     Accumulated net realized loss
       on investments                                     (816,203)                        (2,310,112)
     Net unrealized appreciation in
       value of investments                              2,114,454                         25,200,303
                                                       -----------                        -----------
                                                        26,565,307                        108,276,731
                                                       -----------                        -----------








                                               Acquiring Fund
                                                 Pro Forma
                                           Cost           Value
                                           ----           -----

ASSETS
Investments, at value                   107,954,735    135,269,492
Cash collateral received
  for securities loaned                                 25,740,719
Receivables:
     Securities Sold                                       229,896
     Interest                                                5,596
     Dividends                                              76,959
Prepaid expenses and
  other assets                                                 877
                                                       -----------
Total Assets                                           161,323,539
                                                       -----------

LIABILITIES
Payables:
     Upon return of securities
       loaned                                           25,740,719
     Investment advisory fee                               125,530
     Other accrued expenses                                631,629
                                                       -----------
Total Liabilities                                       26,497,878
                                                       -----------

Net Assets                                             134,825,661
                                                       -----------

Net Assets Consist Of:
     Capital stock, $0.01 par value;
        3,849,524 shares issued
        and outstanding for CLM
       (25,000,000 shares authorized)                       38,495
     Paid-in-capital ($0.01 par value;
       9,860,115 shares issued and
       outstanding; 150,000,000 shares
       authorized for MGC)                             137,597,765
     Cost of 2,239,440, and 0 shares
       repurchased, respectively                       (26,999,661)
     Accumulated net realized loss
       on investments                                   (3,126,315)
     Net unrealized appreciation in
       value of investments                             27,314,757
                                                       -----------
                                                       134,825,041
                                                       -----------






                                      B-25














                                     PART C
                                OTHER INFORMATION

ITEM 15. INDEMNIFICATION

         A policy of insurance covering Cornerstone Advisors, Inc., its
affiliates, and all of the registered investment companies advised by
Cornerstone Advisors insures the Registrant's directors and officers and others
against liability arising by reason of an alleged breach of duty caused by any
negligent act, error or accidental omission in the scope of their duties.

ITEM 16. EXHIBITS.

(1) Copy of the Articles of Incorporation of CLM as now in effect, including any
amendments thereto.

(2) Amended and Restated By-Laws as of February 20, 2004 of the Registrant

(3) Not Applicable

(4)(i) Copy of PGF Agreement and Plan of Reorganization (included as Exhibit A
to the Proxy Statement/Prospectus, which is part of the Registration Statement
on Form N-14).

(4)(ii) Copy of MGC Agreement and Plan of Reorganization (included as Exhibit B
to the Proxy Statement/Prospectus, which is part of the Registration Statement
on Form N-14).

(5) Not Applicable

(6) Copy of the Investment Management Agreement dated as of April 19, 2001
between Cornerstone Advisors, Inc. and CLM - incorporated herein by reference to
Appendix A to CLM's Proxy Statement for the Annual Meeting of Stockholders held
on April 19, 2001 on Schedule 14A as filed with the Commission on March 7, 2001.

(7) Not Applicable

(8) Not Applicable

(9) Copy of the Custody Agreement between CLM and Custodial Trust Company

(10) Not Applicable

(11) Opinion and consent of Counsel, in draft form.

(12) Opinion and consent of Counsel, in draft form, regarding certain tax
matters and consequences to shareholders.



                                      C-1



(13) Not Applicable

(14) Consent of Independent Auditors

(15) Not Applicable

(16) Not Applicable

(17) Not Applicable


ITEM 17. UNDERTAKINGS.

         The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act [17 CFR
230.145c], the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.

         The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of securities at that time shall be deemed to
be the initial bona fide offering of them.

                                   SIGNATURES

         As required by the Securities Act of 1933, this registration statement
has been signed on behalf of the registrant, in the City of New York and the
State of New York, on the 20th day of February, 2004.

                                    CORNERSTONE STRATEGIC VALUE FUND, INC.


                                    By:     /S/ RALPH W. BRADSHAW
                                        ----------------------------------------
                                    Name:   Ralph Bradshaw
                                    Title:  President


                                      C-2




         As required by the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated:

         /S/ ANDREW A. STRAUSS                     /S/ THOMAS H. LENAGH
-----------------------------------        -----------------------------------
Andrew A. Strauss, Director                Thomas H. Lenagh, Director


         /S/ SCOTT B. ROGERS                     /S/ EDWIN MEESE
-----------------------------------        --------------------------
Scott B. Rogers, Director                  Edwin Meese III, Director


         /S/ RALPH W. BRADSHAW                /S/ GLENN W. WILCOX, SR.
------------------------------             ------------------------
Ralph W. Bradshaw, Director                Glenn W. Wilcox, Sr., Director







                                      C-3









-----------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
Pro Forma
Portfolio of Investments (@)
December 31, 2003
(Unaudited)
                                                        TARGET FUND            ACQUIRING FUND                 Pro Forma
                                        % of                MGC                      CLM                     Combined Fund
                                         Net      Shares/      Market        Shares/     Market          Shares/         Market
                                       Assets       Par       Value ($)         Par       Value            Par         Value ($)
                                       ------------------------------------------------------------------------------------------
                                                                                                  

EQUITY SECURITIES                       94.38%

CLOSED-END DOMESTIC FUNDS -              1.73%
Adams Express Co.                        0.46%                                  49,500     614,295         49,500        614,295
General American
  Investor Co. Inc.                      0.23%                                  10,500     312,165         10,500        312,165
Salomon Brothers Fund,
  Inc. (The)                             0.16%                                  18,400     221,352         18,400        221,352
Tri-Continental Corp.                    0.47%                                  39,000     639,600         39,000        639,600
Zweig Fund, Inc.                         0.40%                                 110,400     540,960        110,400        540,960
                                                                                        -----------                   -----------
                                                                                         2,328,372                     2,328,372

CONSUMER DISCRETIONARY -                13.73%
Bed Bath & Beyond Inc. *                 0.03%                                   1,000      43,350          1,000         43,350
Best Buy Co., Inc.                       0.04%                                   1,000      52,240          1,000         52,240
Carnival Corp.                           0.06%                                   2,100      83,433          2,100         83,433
Carter's, Inc.*                          0.05%       2,500         63,625                                   2,500         63,625
Clear Channel
  Communications,  Inc.                  0.07%                                   2,100      98,343          2,100         98,343
Comcast Corp., Class A *                 0.09%                                   3,882     127,601          3,882        127,601
Costco Wholesale Corp. *                 0.04%                                   1,500      55,770          1,500         55,770
CVS Corp.                                0.04%                                   1,500      54,180          1,500         54,180
Delphi Corp.                             0.02%                                   2,000      20,420          2,000         20,420
Ford Motor Co.                           0.08%                                   6,500     104,000          6,500        104,000
Fortune Brands, Inc.                     0.05%                                   1,000      71,490          1,000         71,490
Furniture Brands
  International, Inc.                    2.18%     100,100      2,935,933                                 100,100      2,935,933
Gannett Co., Inc.                        0.07%                                   1,000      89,160          1,000         89,160
Gap, Inc. (The)                          0.05%                                   2,700      62,667          2,700         62,667
General Motors Corp.                     0.08%                                   1,900     101,460          1,900        101,460
Gildan Activewear Inc.,
  Class A*                               1.18%      51,500      1,590,320                                  51,500      1,590,320
Goodyear Tire &  Rubber
  Co. (The) *                            0.01%                                   2,500      19,650          2,500         19,650
Harley-Davidson, Inc.                    0.04%                                   1,000      47,530          1,000         47,530
Hilton Hotels Corp.                      0.02%                                   1,500      25,695          1,500         25,695
Home Depot, Inc. (The)                   0.16%                                   6,100     216,489          6,100        216,489
Kohl's Corp. *                           0.03%                                   1,000      44,940          1,000         44,940






                                      -1-


Lowe's Companies, Inc.                   0.10%                                   2,500     138,475          2,500        138,475
Marriott International,
  Inc., Class A                          0.03%                                   1,000      46,200          1,000         46,200
Martek Biosciences Corp.*                1.47%      30,500      1,981,585                                  30,500      1,981,585
May Department Stores Co.
  (The)                                  0.02%                                   1,000      29,070          1,000         29,070
McDonald's Corp.                         0.04%                                   2,100      52,143          2,100         52,143
Multimedia Games, Inc.*                  1.31%      43,000      1,767,300                                  43,000      1,767,300
NIKE, Inc., Class B                      0.05%                                   1,000      68,460          1,000         68,460
Omnicom Group Inc.                       0.06%                                   1,000      87,330          1,000         87,330
Reebok International Ltd.                0.04%                                   1,500      58,980          1,500         58,980
Staples, Inc. *                          0.03%                                   1,500      40,950          1,500         40,950
Starbucks Corp. *                        0.03%                                   1,200      39,672          1,200         39,672
Target Corp.                             0.09%                                   3,200     122,880          3,200        122,880
The Cheesecake Factory Inc.*             1.23%      37,700      1,659,931                                  37,700      1,659,931
Thor Industries, Inc.                    1.20%      28,800      1,619,136                                  28,800      1,619,136
Time Warner Inc. *                       0.14%                                  10,500     188,895         10,500        188,895
Tractor Supply Company*                  0.55%      19,200        746,688                                  19,200        746,688
United Natural Foods, Inc.*              2.11%      79,200      2,844,072                                  79,200      2,844,072
Viacom Inc., non-voting
  Class B                                0.20%                                   6,000     266,280          6,000        266,280
Wal-Mart Stores, Inc.                    0.52%                                  13,300     705,565         13,300        705,565
Walt Disney Co. (The)                    0.08%                                   4,700     109,651          4,700        109,651
Yum! Brands, Inc. *                      0.03%                                   1,000      34,400          1,000         34,400
                                                             -------------                                            -----------
                                                               15,208,590                3,307,369                    18,515,959

CONSUMER STAPLES -                       4.71%
Albertson's, Inc.                        0.04%                                   2,500      56,625          2,500         56,625
Altria Group, Inc.                       0.20%                                   4,900     266,658          4,900        266,658
Anheuser-Busch Companies,
  Inc.                                   0.09%                                   2,200     115,896          2,200        115,896
Archer-Daniels-Midland Co.               0.03%                                   2,415      36,756          2,415         36,756
Coca-Cola Co. (The)                      0.24%                                   6,500     329,875          6,500        329,875
Colgate-Palmolive Co.                    0.04%                                   1,000      50,050          1,000         50,050
ConAgra Foods, Inc.                      0.04%                                   1,900      50,141          1,900         50,141
General Mills, Inc.                      0.08%                                   2,500     113,250          2,500        113,250
Gillette Co. (The)                       0.07%                                   2,600      95,498          2,600         95,498
Kimberly-Clark Corp.                     0.04%                                     900      53,181            900         53,181
Kroger Co. (The) *                       0.05%                                   3,500      64,785          3,500         64,785
Panera Bread Co. Class A*                1.24%      42,300      1,672,119                                  42,300      1,672,119
PepsiCo, Inc.                            0.18%                                   5,100     237,762          5,100        237,762
Performance Food Group Co.*              1.05%      39,300      1,421,481                                  39,300      1,421,481
Philadelphia Suburban Corp.              0.87%      53,077      1,173,002                                  53,077      1,173,002
Procter & Gamble Co. (The)               0.28%                                   3,800     379,544          3,800        379,544
Sysco Corp.                              0.09%                                   3,300     122,859          3,300        122,859
Walgreen Co.                             0.09%                                   3,200     116,416          3,200        116,416
                                                             -------------              -----------
                                                                4,266,602                2,089,296                     6,355,898



                                      -2-



ENERGY -                                 5.26%
Anadarko Petroleum Corp.                 0.03%                                     900      45,909            900         45,909
Baker Hughes Inc.                        0.06%                                   2,500      80,400          2,500         80,400
CenterPoint Energy, Inc.                 0.02%                                   2,500      24,225          2,500         24,225
ChevronTexaco Corp.                      0.21%                                   3,340     288,543          3,340        288,543
ConocoPhillips                           0.08%                                   1,728     113,305          1,728        113,305
Exxon Mobil Corp.                        0.58%                                  19,000     779,000         19,000        779,000
FMC Technologies, Inc.*                  1.83%     105,800      2,465,140                                 105,800      2,465,140
Reliant Resources, Inc. *                0.01%                                   1,971      14,506          1,971         14,506
Schlumberger Ltd.                        0.08%                                   2,000     109,440          2,000        109,440
Ultra Petroleum Corp.*                   1.47%      80,300      1,976,986                                  80,300      1,976,986
Western Gas Resources, Inc.              0.89%      25,400      1,200,150                                  25,400      1,200,150
                                                             -------------              -----------                   -----------
                                                                5,642,276                1,455,328                     7,097,604

FINANCIALS -                            10.70%
Affiliated Managers Group,
  Inc.*                                  2.08%      40,400      2,811,436                                  40,400      2,811,436
AFLAC Inc.                               0.05%                                   1,900      68,742          1,900         68,742
Allstate Corp. (The)                     0.08%                                   2,500     107,550          2,500        107,550
American Express Co.                     0.11%                                   3,000     144,690          3,000        144,690
American International Group,
  Inc.                                   0.44%                                   9,042     599,304          9,042        599,304
Bank of America Corp.                    0.23%                                   3,900     313,677          3,900        313,677
Bank of New York Co., Inc. (The)         0.06%                                   2,500      82,800          2,500         82,800
Bank One Corp.                           0.09%                                   2,600     118,534          2,600        118,534
BB&T Corp.                               0.05%                                   1,600      61,824          1,600         61,824
Charles Schwab Corp. (The)               0.02%                                   2,500      29,600          2,500         29,600
Citigroup Inc.                           0.47%                                  13,100     635,874         13,100        635,874
Direct General Corp.                     1.01%      41,000      1,357,100                                  41,000      1,357,100
Fannie Mae                               0.12%                                   2,200     165,132          2,200        165,132
Fifth Third Bancorp                      0.09%                                   2,000     118,200          2,000        118,200
First Niagara Financial Group, Inc.      0.93%      84,000      1,252,440                                  84,000      1,252,440
FleetBoston Financial Corp.              0.08%                                   2,400     104,760          2,400        104,760
Freddie Mac                              0.11%                                   2,500     145,800          2,500        145,800
Goldman Sachs Group, Inc. (The)          0.10%                                   1,300     128,349          1,300        128,349
HSBC Holdings plc, ADR                   0.06%                                     963      75,904            963         75,904
J. P. Morgan Chase & Co.                 0.16%                                   6,000     220,380          6,000        220,380
Marsh & McLennan Companies, Inc.         0.14%                                   4,000     191,560          4,000        191,560
MBNA Corp.                               0.06%                                   3,000      74,550          3,000         74,550
Mellon Financial Corp.                   0.04%                                   1,800      57,798          1,800         57,798
Merrill Lynch & Co., Inc.                0.09%                                   2,000     117,300          2,000        117,300
MetLife, Inc.                            0.07%                                   2,700      90,909          2,700         90,909



                                      -3-


Morgan Stanley                           0.15%                                   3,500     202,545          3,500        202,545
National City Corp.                      0.06%                                   2,200      74,668          2,200         74,668
National Financial Partners Corp.        0.83%      40,500      1,115,775                                  40,500      1,115,775
Platinum Underwriters Holdings, Ltd.     1.62%      72,600      2,178,000                                  72,600      2,178,000
PNC Financial Services Group             0.04%                                   1,100      60,203          1,100         60,203
Prudential Financial, Inc.               0.08%                                   2,500     104,425          2,500        104,425
Scottish Re Group Ltd.                   0.35%      22,900        475,862                                  22,900        475,862
State Street Corp.                       0.04%                                   1,000      52,080          1,000         52,080
SunTrust Banks, Inc.                     0.06%                                   1,100      78,650          1,100         78,650
The First Marblehead Corp. *             0.20%      12,600        275,688                                  12,600        275,688
Travelers Property Casualty Corp.,
  Class A                                0.01%                                     738      12,383            738         12,383
Travelers Property Casualty Corp.,
  Class B                                0.02%                                   1,517      25,743          1,517         25,743
U.S. Bancorp                             0.09%                                   4,200     125,076          4,200        125,076
Wachovia Corp.                           0.12%                                   3,600     167,724          3,600        167,724
Washington Mutual, Inc.                  0.09%                                   3,150     126,378          3,150        126,378
Wells Fargo & Co.                        0.21%                                   4,800     282,672          4,800        282,672
                                                             -------------              -----------                   -----------
                                                             -------------              -----------                   -----------
                                                                9,466,301                4,965,784                    14,432,085

HEALTHCARE -                            12.44%
Abbott Laboratories                      0.14%                                   4,000     186,400          4,000        186,400
Amgen Inc. *                             0.16%                                   3,500     216,300          3,500        216,300
Baxter International Inc.                0.06%                                   2,500      76,300          2,500         76,300
Boston Scientific Corp. *                0.08%                                   3,000     110,280          3,000        110,280
Bristol-Myers Squibb Co.                 0.10%                                   4,500     128,700          4,500        128,700
Cardinal Health, Inc.                    0.05%                                   1,000      61,160          1,000         61,160
Cooper Companies, Inc                    2.10%      60,000      2,827,800                                  60,000      2,827,800
Edwards Lifesciences                     2.01%      89,900      2,704,192                                  89,900      2,704,192
Eli Lilly & Co.                          0.16%                                   3,000     210,990          3,000        210,990
HCA Inc.                                 0.06%                                   2,000      85,920          2,000         85,920
HEALTHSOUTH Corp. *                      0.01%                                   2,500      11,450          2,500         11,450
IDEXX Laboratories, Inc.*                1.25%      36,400      1,684,592                                  36,400      1,684,592
Integra Lifesciences Holdings*           1.69%      79,500      2,276,085                                  79,500      2,276,085
Johnson & Johnson                        0.29%                                   7,500     387,450          7,500        387,450
McKesson Corp.                           0.02%                                   1,000      32,160          1,000         32,160
Medco Health Solutions, Inc. *           0.02%                                     723      24,575            723         24,575
Medtronic, Inc.                          0.16%                                   4,300     209,023          4,300        209,023
Merck & Co. Inc.                         0.21%                                   6,000     277,200          6,000        277,200
Neurocrine Biosciences, Inc. *           1.28%      31,700      1,728,918                                  31,700      1,728,918
NPS Pharmaceuticals, Inc.*               1.82%      80,000      2,459,200                                  80,000      2,459,200
Pfizer Inc.                              0.54%                                  20,500     724,265         20,500        724,265
Schering-Plough Corp.                    0.03%                                   2,500      43,475          2,500         43,475
UnitedHealth Group Inc.                  0.13%                                   3,000     174,540          3,000        174,540
Wyeth                                    0.10%                                   3,300     140,085          3,300        140,085
                                                             -------------              -----------                   -----------
                                                               13,680,787                3,100,273                    16,781,060



                                      -4-



INDUSTRIALS -                           12.81%
3M Co.                                   0.13%                                   2,000     170,060          2,000        170,060
Automatic Data Processing, Inc.          0.06%                                   2,000      79,220          2,000         79,220
Boeing Co. (The)                         0.09%                                   3,000     126,420          3,000        126,420
Caterpillar Inc.                         0.08%                                   1,300     107,926          1,300        107,926
Cendant Corp. *                          0.04%                                   2,700      60,129          2,700         60,129
Central Freight Lines, Inc.*             0.04%       3,300         58,575                                   3,300         58,575
Compass Minerals International, Inc.*    0.56%      52,700        752,556                                  52,700        752,556
Concord EFS, Inc. *                      0.03%                                   2,500      37,100          2,500         37,100
DSP Group, Inc.*                         2.51%     135,600      3,377,796                                 135,600      3,377,796
EDO Corp.                                1.03%      56,500      1,392,725                                  56,500      1,392,725
Emerson Electric Co.                     0.07%                                   1,500      97,125          1,500         97,125
FedEx Corp.                              0.05%                                   1,000      67,500          1,000         67,500
General Electric Co.                     0.67%                                  29,000     898,420         29,000        898,420
Heartland Express, Inc.                  1.12%      62,337      1,507,932                                  62,337      1,507,932
Honeywell International Inc.             0.07%                                   2,800      93,604          2,800         93,604
Illinois Tool Works Inc.                 0.06%                                   1,000      83,910          1,000         83,910
Lockheed Martin Corp.                    0.06%                                   1,500      77,100          1,500         77,100
Masco Corp.                              0.03%                                   1,700      46,597          1,700         46,597
Overnight Corp.*                         0.09%       5,600        127,400                                   5,600        127,400
Paychex, Inc.                            0.07%                                   2,500      93,000          2,500         93,000
Quanta Services, Inc.*                   0.38%      70,000        511,000                                  70,000        511,000
Shuffle Master, Inc.*                    1.88%      73,400      2,541,108                                  73,400      2,541,108
Southwest Airlines Co.                   0.03%                                   2,700      43,578          2,700         43,578
Swift Transportation Co., Inc.*          1.05%      67,100      1,410,442                                  67,100      1,410,442
Transocean Inc. *                        0.04%                                   2,500      60,025          2,500         60,025
Tyco International Ltd.                  0.14%                                   7,000     185,500          7,000        185,500
Union Pacific Corp.                      0.05%                                   1,000      69,480          1,000         69,480
United Parcel Service, Inc., Class B     0.19%                                   3,500     260,925          3,500        260,925
United Technologies Corp.                0.12%                                   1,700     161,109          1,700        161,109
Universal Technical Institute Inc.*      0.18%       8,200        246,000                                   8,200        246,000
USF Corp.                                1.84%      72,600      2,482,194                                  72,600      2,482,194
Waste Management, Inc.                   0.04%                                   1,700      50,320          1,700         50,320
                                                             -------------              -----------                   -----------
                                                               14,407,728                2,869,048                    17,276,776

INFORMATION TECHNOLOGY -                22.81%
Agere Systems Inc.,  Class A *           0.00%                                     115         351            115            351
Agere Systems Inc.,  Class B *           0.01%                                   2,830       8,207          2,830          8,207
Agilent Technologies, Inc.               0.04%                                   1,800      52,632          1,800         52,632



                                      -5-


Altera Corp. *                           0.03%                                   1,500      34,050          1,500         34,050
Analog Devices, Inc.                     0.03%                                   1,000      45,650          1,000         45,650
Applied Films Corp                       1.52%      62,000      2,047,240                                  62,000      2,047,240
Applied Materials, Inc. *                0.05%                                   2,900      65,105          2,900         65,105
Avocent Corporation                      1.91%      70,500      2,574,660                                  70,500      2,574,660
Caci International Inc. Class A          1.95%      54,100      2,630,342                                  54,100      2,630,342
Callidus Software*                       0.04%       3,300         58,376                                   3,300         58,376
Cisco Systems, Inc. *                    0.30%                                  16,900     410,501         16,900        410,501
Corning Inc. *                           0.02%                                   3,000      31,290          3,000         31,290
Dell Inc. *                              0.16%                                   6,500     220,740          6,500        220,740
Electronic Data Systems Corp.            0.02%                                   1,000      24,540          1,000         24,540
EMC Corp. *                              3.48%     355,830      4,597,324        7,000      90,440        362,830      4,687,764
Enterasys Networks, Inc.*                1.56%     562,100      2,107,875                                 562,100      2,107,875
Equinix, Inc.*                           0.35%      16,500        465,300                                  16,500        465,300
Fairchild Semiconductor
  International, Inc.*                   3.73%     201,600      5,033,952                                 201,600      5,033,952
First Data Corp.                         0.15%                                   5,000     205,450          5,000        205,450
Harris Interactive Inc.*                 0.94%     152,200      1,263,260                                 152,200      1,263,260
Hewlett-Packard Co.                      0.13%                                   7,800     179,166          7,800        179,166
Intel Corp.                              0.47%                                  19,500     627,900         19,500        627,900
International Business Machines Corp.    0.37%                                   5,400     500,472          5,400        500,472
ITT Educational Services, Inc.*          1.44%      41,200      1,935,164                                  41,200      1,935,164
Linear Technology Corp.                  0.03%                                   1,000      42,070          1,000         42,070
Maxim Integrated Products, Inc.          0.04%                                   1,000      49,800          1,000         49,800
Micron Technology, Inc. *                0.02%                                   2,500      33,675          2,500         33,675
Microsoft Corp.                          0.62%                                  30,200     831,708         30,200        831,708
Motorola, Inc.                           0.07%                                   6,600      92,862          6,600         92,862
Oracle Corp. *                           0.12%                                  12,300     162,360         12,300        162,360
QUALCOMM Inc.                            0.10%                                   2,500     134,825          2,500        134,825
Sanmina-SCI Corp. *                      0.02%                                   2,500      31,525          2,500         31,525
Siebel Systems, Inc. *                   0.03%                                   2,500      34,675          2,500         34,675
Skyworks Solutions, Inc.*                1.16%     179,100      1,558,170                                 179,100      1,558,170
Solectron Corp. *                        0.01%                                   3,000      17,730          3,000         17,730
Sun Microsystems, Inc. *                 0.02%                                   7,500      33,675          7,500         33,675
Texas Instruments Inc.                   0.11%                                   4,900     143,962          4,900        143,962
Yahoo! Inc. *                            0.06%                                   1,900      85,823          1,900         85,823
Zoran Corp.*                             1.70%     131,750      2,291,133                                 131,750      2,291,133
                                                             -------------              -----------                   -----------
                                                               26,562,795                4,191,184                    30,753,979

MATERIALS -                              8.94%
Air Products & Chemicals, Inc.           0.04%                                   1,000      52,830          1,000         52,830
Alcoa Inc.                               0.09%                                   3,100     117,800          3,100        117,800
Dow Chemical Co. (The)                   0.08%                                   2,700     112,239          2,700        112,239



                                      -6-


E. I. du Pont de Nemours & Co.           0.07%                                   2,200     100,958          2,200        100,958
General Cable Corp.*                     0.75%     124,200      1,012,230                                 124,200      1,012,230
Georgia-Pacific Corp.                    0.02%                                   1,000      30,670          1,000         30,670
International Paper Co.                  0.06%                                   2,000      86,220          2,000         86,220
Joy Global Inc.                          2.21%     114,100      2,983,715                                 114,100      2,983,715
Packaging Corp of America                2.10%     129,600      2,833,056                                 129,600      2,833,056
Peabody Energy Corp.                     2.07%      67,000      2,794,570                                  67,000      2,794,570
Praxair, Inc.                            0.08%                                   3,000     114,600          3,000        114,600
Steel Dynamics, Inc.*                    1.29%      74,300      1,745,307                                  74,300      1,745,307
Weyerhaeuser Co.                         0.05%                                   1,000      64,000          1,000         64,000
                                                             -------------              -----------                   -----------
                                                               11,368,878                  679,317                    12,048,195

TELECOMMUNICATION SERVICES -             0.83%
AT&T Corp.                               0.04%                                   2,400      48,720          2,400         48,720
AT&T Wireless Services Inc. *            0.03%                                   4,522      36,131          4,522         36,131
BellSouth Corp.                          0.14%                                   6,500     183,950          6,500        183,950
Journal Communications, Inc.             0.16%      12,000        222,360                                  12,000        222,360
Lucent Technologies Inc. *               0.02%                                  10,700      30,388         10,700         30,388
SBC Communications Inc.                  0.05%                                   2,500      70,150          2,500         70,150
Sprint Corp. (FON Group)                 0.15%                                   7,900     205,953          7,900        205,953
Sprint Corp. (PCS Group) *               0.04%                                   3,000      49,260          3,000         49,260
Verizon Communications Inc.              0.21%                                   7,900     277,132          7,900        277,132
                                                             -------------              -----------                   -----------
                                                                  222,360                  901,684                     1,124,044

UTILITIES -                              0.41%
American Electric Power Co., Inc.        0.03%                                   1,200      36,612          1,200         36,612
Dominion Resources, Inc.                 0.05%                                   1,000      63,830          1,000         63,830
Duke Energy Corp.                        0.04%                                   2,800      57,260          2,800         57,260
Edison International *                   0.04%                                   2,500      54,825          2,500         54,825
FirstEnergy Corp.                        0.07%                                   2,500      88,000          2,500         88,000
Scottish Power plc, ADR                  0.08%                                   4,000     108,720          4,000        108,720
Southern Co. (The)                       0.05%                                   2,400      72,600          2,400         72,600
TXU Corp.                                0.02%                                   1,000      23,720          1,000         23,720
Xcel Energy, Inc.                        0.03%                                   2,500      42,450          2,500         42,450
                                                             -------------              -----------                   -----------
                                                                        0                  548,017                       548,017

TOTAL EQUITY SECURITIES                 94.38%                100,826,318               26,435,672                   127,261,990
                                                             -------------              -----------                   -----------

SHORT-TERM INVESTMENTS -                25.03%
   REPURCHASE AGREEMENTS -              25.03%
Bear, Stearns & Co. Inc.                 5.83%   7,867,525      7,867,525                               7,867,525      7,867,525
(Agreement dated 12/31/03 to be
repurchased at $7,867,897)
0.85%, 01/02/04




                                      -7-



Bear, Stearns & Co. Inc.                17.70%  23,869,214     23,869,214                              23,869,214     23,869,214
(Agreement dated 12/31/03 to be
repurchased at $23,870,620)
1.06%**, 01/02/04***

Bear, Stearns & Co. Inc.                 1.02%   1,380,273      1,380,273                               1,380,273      1,380,273
(Agreement dated 12/31/03 to be
repurchased at $1,380,345)
0.94%**, 01/02/04***

Bear, Stearns & Co. Inc.                 0.10%                                 139,977     139,977        139,977        139,977
(Agreement dated 12/31/03 to
be repurchased at $139,984),
0.85%,  01/02/04

Bear, Stearns & Co. Inc.                 0.32%                                 425,588     425,588        425,588        425,588
(Agreement dated 12/31/03 to
be repurchased at $425,613),
1.06%**,  01/02/04 ***

Bear, Stearns & Co. Inc.                 0.05%                                  65,644      65,644         65,644         65,644
(Agreement dated 12/31/03 to
be repurchased at $65,647),
0.94%**,  01/02/04 ***
                                                             -------------              -----------                   -----------

TOTAL SHORT-TERM INVESTMENTS            25.03%                 33,117,012                  631,209                    33,748,221


                                                             -------------              -----------                   -----------
TOTAL INVESTMENTS AT MARKET            119.41%                133,943,330               27,066,881                    161,010,211
                                                             -------------              -----------                   -----------
TOTAL INVESTMENTS AT COST                                     108,743,027               24,952,427                    133,695,454
                                                             -------------              -----------                   -----------




                                      -8-



@      No adjustments are shown to the unaudited pro forma combined portfolio of
       investments due to the fact that upon consummation of the merger,
       securities would need to be sold in order for Acquiring Fund to comply
       with its prospectus restrictions. The foregoing sentence shall not
       restrict in any way the ability of the investment adviser of any of the
       funds from buying or selling securities in the normal course of such
       fund's business and operations.

*     Non-income producing securities








                                      -9-




--------------------------------------------------------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
Pro Forma
Portfolio of Investments (@)
December 31, 2003
(Unaudited)
                                                          TARGET FUND            ACQUIRING FUND                Pro Forma
                                         % of                PGF                       CLM                   Combined Fund
                                          Net       Shares/       Market      Shares/      Market       Shares/        Market
                                        Assets        Par        Value ($)       Par       Value          Par         Value ($)
                                      ------------------------------------------------------------------------------------------
EQUITY SECURITIES                       99.51%

CLOSED-END DOMESTIC FUNDS -              6.23%
Adams Express Co.                        1.17%                                  49,500     614,295         49,500        614,295
General American Investor Co. Inc.       0.59%                                  10,500     312,165         10,500        312,165
Salomon Brothers Fund, Inc. (The)        0.42%                                  18,400     221,352         18,400        221,352
Tri-Continental Corp.                    2.40%      38,000        623,200       39,000     639,600         77,000      1,262,800
Zweig Fund, Inc.                         1.64%      66,200        324,380      110,400     540,960        176,600        865,340
                                                              -----------               ----------                    ----------
                                                                  947,580                2,328,372                     3,275,952

CONSUMER DISCRETIONARY -                12.92%
Bed Bath & Beyond Inc. *                 0.08%                                   1,000      43,350          1,000         43,350
Best Buy Co., Inc.                       0.22%       1,250         65,300        1,000      52,240          2,250        117,540
Carnival Corp.                           0.36%       2,700        107,271        2,100      83,433          4,800        190,704
Circuit City Stores, Inc.                0.02%       1,000         10,130                                   1,000         10,130
Clear Channel Communications, Inc.       0.43%       2,700        126,441        2,100      98,343          4,800        224,784
Comcast Corp., Class A *                 0.47%       3,655        120,140        3,882     127,601          7,537        247,741
Comcast Corp., Special Class A*          0.24%       4,100        128,248                                   4,100        128,248
Costco Wholesale Corp. *                 0.11%                                   1,500      55,770          1,500         55,770
CVS Corp.                                0.17%       1,000         36,120        1,500      54,180          2,500         90,300
Delphi Corp.                             0.09%       2,600         26,546        2,000      20,420          4,600         46,966
Eastman Kodak Co.                        0.07%       1,400         35,938                                   1,400         35,938
Federated Department Stores, Inc.        0.09%       1,000         47,130                                   1,000         47,130
Ford Motor Co.                           0.37%       5,800         92,800        6,500     104,000         12,300        196,800
Fortune Brands, Inc.                     0.14%                                   1,000      71,490          1,000         71,490
Gannett Co., Inc.                        0.17%                                   1,000      89,160          1,000         89,160
Gap, Inc. (The)                          0.23%       2,500         58,025        2,700      62,667          5,200        120,692
General Motors Corp.                     0.46%       2,600        138,840        1,900     101,460          4,500        240,300
Goodyear Tire &  Rubber Co. (The) *      0.04%                                   2,500      19,650          2,500         19,650
Harley-Davidson, Inc.                    0.22%       1,400         66,542        1,000      47,530          2,400        114,072
Hilton Hotels Corp.                      0.10%       1,700         29,121        1,500      25,695          3,200         54,816
Home Depot, Inc. (The)                   0.92%       7,500        266,175        6,100     216,489         13,600        482,664
Kohl's Corp. *                           0.17%       1,000         44,940        1,000      44,940          2,000         89,880
Limited Brands                           0.09%       2,500         45,075                                   2,500         45,075




                                      -10-


Lowe's Companies, Inc.                   0.53%       2,500        138,475        2,500     138,475          5,000        276,950
Marriott International, Inc., Class A    0.18%       1,100         50,820        1,000      46,200          2,100         97,020
Mattel, Inc.                             0.05%       1,500         28,905                                   1,500         28,905
May Department Stores Co. (The)          0.13%       1,400         40,698        1,000      29,070          2,400         69,768
McDonald's Corp.                         0.29%       4,000         99,320        2,100      52,143          6,100        151,463
Monsanto Co.                             0.03%         580         16,692                                     580         16,692
NIKE, Inc., Class B                      0.30%       1,300         88,998        1,000      68,460          2,300        157,458
Omnicom Group Inc.                       0.27%         600         52,398        1,000      87,330          1,600        139,728
Reebok International Ltd.                0.11%                                   1,500      58,980          1,500         58,980
Sears, Roebuck & Co.                     0.14%       1,600         72,784                                   1,600         72,784
Staples, Inc. *                          0.16%       1,500         40,950        1,500      40,950          3,000         81,900
Starbucks Corp. *                        0.18%       1,700         56,202        1,200      39,672          2,900         95,874
Target Corp.                             0.35%       1,600         61,440        3,200     122,880          4,800        184,320
Time Warner Inc. *                       0.85%      14,250        256,358       10,500     188,895         24,750        445,253
TJX Companies, Inc. (The)                0.10%       2,500         55,125                                   2,500         55,125
Toys "R" Us, Inc.*                       0.02%       1,000         12,640                                   1,000         12,640
Viacom Inc., non-voting Class B          0.96%       5,400        239,652        6,000     266,280         11,400        505,932
Wal-Mart Stores, Inc.                    2.45%      11,000        583,550       13,300     705,565         24,300      1,289,115
Walt Disney Co. (The)                    0.50%       6,500        151,645        4,700     109,651         11,200        261,296
Yum! Brands, Inc. *                      0.07%                                   1,000      34,400          1,000         34,400
                                                              -----------               -----------                   -----------
                                                                3,491,434                3,307,369                     6,798,803

CONSUMER STAPLES -                       7.86%
Albertson's, Inc.                        0.11%                                   2,500      56,625          2,500         56,625
Altria Group, Inc.                       0.96%       4,400        239,448        4,900     266,658          9,300        506,106
Anheuser-Busch Companies, Inc.           0.47%       2,500        131,700        2,200     115,896          4,700        247,596
Archer-Daniels-Midland Co.               0.16%       3,045         46,345        2,415      36,756          5,460         83,101
Campbell Soup Co.                        0.10%       2,000         53,600                                   2,000         53,600
Coca-Cola Co. (The)                      1.23%       6,300        319,725        6,500     329,875         12,800        649,600
Coca-Cola Enterprises Inc.               0.06%       1,500         32,805                                   1,500         32,805
Colgate-Palmolive Co.                    0.20%       1,100         55,055        1,000      50,050          2,100        105,105
ConAgra Foods, Inc.                      0.22%       2,500         65,975        1,900      50,141          4,400        116,116
General Mills, Inc.                      0.22%                                   2,500     113,250          2,500        113,250
Gillette Co. (The)                       0.39%       3,000        110,190        2,600      95,498          5,600        205,688
H.J. Heinz Co.                           0.11%       1,600         58,288                                   1,600         58,288
Kimberly-Clark Corp.                     0.38%       2,500        147,725          900      53,181          3,400        200,906
Kroger Co. (The) *                       0.17%       1,300         24,063        3,500      64,785          4,800         88,848
Pepsi Bottling Group, Inc.               0.05%       1,000         24,180                                   1,000         24,180
PepsiCo, Inc.                            0.81%       4,000        186,480        5,100     237,762          9,100        424,242
Procter & Gamble Co. (The)               1.29%       3,000        299,640        3,800     379,544          6,800        679,184
Safeway Inc.*                            0.10%       2,500         54,775                                   2,500         54,775
Sara Lee Corp.                           0.05%       1,300         28,223                                   1,300         28,223
Sysco Corp.                              0.41%       2,500         93,075        3,300     122,859          5,800        215,934
Walgreen Co.                             0.37%       2,100         76,398        3,200     116,416          5,300        192,814
                                                              -----------               -----------                   -----------
                                                                2,047,690                2,089,296                     4,136,986




                                      -11-



ENERGY -                                 5.79%
Anadarko Petroleum Corp.                 0.20%       1,200         61,212          900      45,909          2,100        107,121
Baker Hughes Inc.                        0.22%       1,100         35,376        2,500      80,400          3,600        115,776
CenterPoint Energy, Inc.                 0.07%       1,400         13,566        2,500      24,225          3,900         37,791
ChevronTexaco Corp.                      1.26%       4,325        373,637        3,340     288,543          7,665        662,180
ConocoPhillips                           0.53%       2,509        164,515        1,728     113,305          4,237        277,820
El Paso  Corp.                           0.04%       2,500         20,475                                   2,500         20,475
Exxon Mobil Corp.                        2.77%      16,500        676,500       19,000     779,000         35,500      1,455,500
Marathon Oil Corp.                       0.09%       1,500         49,635                                   1,500         49,635
Reliant Resources, Inc. *                0.04%       1,104          8,125        1,971      14,506          3,075         22,631
Schlumberger Ltd.                        0.48%       2,600        142,272        2,000     109,440          4,600        251,712
Unocal Corp.                             0.08%       1,200         44,196                                   1,200         44,196
                                                              -----------               -----------
                                                                1,589,509                1,455,328                     3,044,837

FINANCIALS -                            19.16%
AFLAC Inc.                               0.31%       2,600         94,068        1,900      68,742          4,500        162,810
Allstate Corp. (The)                     0.47%       3,300        141,966        2,500     107,550          5,800        249,516
American Express Co.                     0.65%       4,100        197,743        3,000     144,690          7,100        342,433
American International Group, Inc.       1.89%       5,989        396,951        9,042     599,304         15,031        996,255
Aon Corp.                                0.05%       1,200         28,728                                   1,200         28,728
Bank of America Corp.                    1.25%       4,300        345,849        3,900     313,677          8,200        659,526
Bank of New York Co., Inc. (The)         0.37%       3,400        112,608        2,500      82,800          5,900        195,408
Bank One Corp.                           0.47%       2,800        127,652        2,600     118,534          5,400        246,186
BB&T Corp.                               0.12%                                   1,600      61,824          1,600         61,824
Charles Schwab Corp. (The)               0.14%       3,500         41,440        2,500      29,600          6,000         71,040
Citigroup Inc.                           2.41%      13,000        631,020       13,100     635,874         26,100      1,266,894
Fannie Mae                               0.53%       1,500        112,590        2,200     165,132          3,700        277,722
Fifth Third Bancorp                      0.45%       2,000        118,200        2,000     118,200          4,000        236,400
FleetBoston Financial Corp.              0.54%       4,100        178,965        2,400     104,760          6,500        283,725
Franklin Resources, Inc.                 0.12%       1,200         62,472                                   1,200         62,472
Freddie Mac                              0.45%       1,600         93,312        2,500     145,800          4,100        239,112
Goldman Sachs Group, Inc. (The)          0.53%       1,500        148,095        1,300     128,349          2,800        276,444
Hartford Financial Services Group,
  Inc. (The)                             0.11%       1,000         59,030                                   1,000         59,030
HSBC Holdings plc, ADR                   0.34%       1,337        105,382          963      75,904          2,300        181,286
J. P. Morgan Chase & Co.                 0.85%       6,200        227,726        6,000     220,380         12,200        448,106
John Hancock Financial Services, Inc.    0.18%       2,500         93,750                                   2,500         93,750
Lehman Brothers Holdings Inc.            0.16%       1,100         84,942                                   1,100         84,942
Marsh & McLennan Companies, Inc.         0.60%       2,600        124,514        4,000     191,560          6,600        316,074
MBNA Corp.                               0.24%       2,100         52,185        3,000      74,550          5,100        126,735
Mellon Financial Corp.                   0.26%       2,500         80,275        1,800      57,798          4,300        138,073




                                      -12-


Merrill Lynch & Co., Inc.                0.64%       3,700        217,005        2,000     117,300          5,700        334,305
MetLife, Inc.                            0.40%       3,500        117,845        2,700      90,909          6,200        208,754
Morgan Stanley                           0.66%       2,500        144,675        3,500     202,545          6,000        347,220
National City Corp.                      0.30%       2,500         84,850        2,200      74,668          4,700        159,518
Northern Trust Corp.                     0.09%       1,000         46,420                                   1,000         46,420
PNC Financial Services Group             0.11%                                   1,100      60,203          1,100         60,203
Prudential Financial, Inc.               0.20%                                   2,500     104,425          2,500        104,425
St. Paul Companies, Inc. (The)           0.08%       1,000         39,650                                   1,000         39,650
State Street Corp.                       0.10%                                   1,000      52,080          1,000         52,080
SunTrust Banks, Inc.                     0.15%                                   1,100      78,650          1,100         78,650
Travelers Property Casualty Corp.,
  Class A                                0.05%         712         11,947          738      12,383          1,450         24,330
Travelers Property Casualty Corp.,
  Class B                                0.10%       1,464         24,844        1,517      25,743          2,981         50,587
U.S. Bancorp                             0.59%       6,201        184,666        4,200     125,076         10,401        309,742
UnumProvident Corp.                      0.03%       1,100         17,347                                   1,100         17,347
Wachovia Corp.                           0.58%       3,000        139,770        3,600     167,724          6,600        307,494
Washington Mutual, Inc.                  0.45%       2,800        112,336        3,150     126,378          5,950        238,714
Wells Fargo & Co.                        1.14%       5,400        318,006        4,800     282,672         10,200        600,678
                                                              -----------               -----------                   -----------
                                                                5,118,824                4,965,784                    10,084,608

HEALTHCARE -                            12.28%
Abbott Laboratories                      0.62%       3,000        139,800        4,000     186,400          7,000        326,200
Allergan, Inc.                           0.15%       1,000         76,810                                   1,000         76,810
Amgen Inc. *                             0.92%       4,300        265,740        3,500     216,300          7,800        482,040
Baxter International Inc.                0.31%       2,800         85,456        2,500      76,300          5,300        161,756
Becton, Dickinson & Co.                  0.09%       1,200         49,368                                   1,200         49,368
Boston Scientific Corp. *                0.35%       2,000         73,520        3,000     110,280          5,000        183,800
Bristol-Myers Squibb Co.                 0.59%       6,400        183,040        4,500     128,700         10,900        311,740
Cardinal Health, Inc.                    0.34%       1,950        119,262        1,000      61,160          2,950        180,422
Eli Lilly & Co.                          0.78%       2,800        196,924        3,000     210,990          5,800        407,914
Guidant Corp.                            0.16%       1,400         84,280                                   1,400         84,280
HCA Inc.                                 0.29%       1,500         64,440        2,000      85,920          3,500        150,360
HEALTHSOUTH Corp. *                      0.04%       1,800          8,244        2,500      11,450          4,300         19,694
Johnson & Johnson                        1.47%       7,500        387,450        7,500     387,450         15,000        774,900
McKesson Corp.                           0.14%       1,300         41,808        1,000      32,160          2,300         73,968
Medco Health Solutions, Inc. *           0.11%         964         32,766          723      24,575          1,687         57,341
Medtronic, Inc.                          0.77%       4,000        194,440        4,300     209,023          8,300        403,463
Merck & Co. Inc.                         1.01%       5,500        254,100        6,000     277,200         11,500        531,300
Pfizer Inc.                              2.71%      19,860        701,654       20,500     724,265         40,360      1,425,919
Schering-Plough Corp.                    0.22%       4,200         73,038        2,500      43,475          6,700        116,513
Tenet Heathcare Corp. *                  0.07%       2,250         36,113                                   2,250         36,113
UnitedHealth Group Inc.                  0.55%       2,000        116,360        3,000     174,540          5,000        290,900
Wyeth                                    0.61%       4,200        178,290        3,300     140,085          7,500        318,375
                                                              -----------               -----------                   -----------
                                                                3,362,903                3,100,273                     6,463,176




                                      -13-



INDUSTRIALS -                           11.06%
3M Co.                                   0.71%       2,400        204,072        2,000     170,060          4,400        374,132
Automatic Data Processing, Inc.          0.37%       2,900        114,869        2,000      79,220          4,900        194,089
Boeing Co. (The)                         0.45%       2,600        109,564        3,000     126,420          5,600        235,984
Caterpillar Inc.                         0.46%       1,600        132,832        1,300     107,926          2,900        240,758
Cendant Corp. *                          0.25%       3,300         73,491        2,700      60,129          6,000        133,620
Concord EFS, Inc. *                      0.14%       2,500         37,100        2,500      37,100          5,000         74,200
CSX Corp.                                0.07%       1,000         35,940                                   1,000         35,940
Emerson Electric Co.                     0.43%       2,000        129,500        1,500      97,125          3,500        226,625
FedEx Corp.                              0.26%       1,000         67,500        1,000      67,500          2,000        135,000
General Dynamics Corp.                   0.10%         600         54,234                                     600         54,234
General Electric Co.                     3.25%      26,200        811,676       29,000     898,420         55,200      1,710,096
Honeywell International Inc.             0.30%       2,000         66,860        2,800      93,604          4,800        160,464
Illinois Tool Works Inc.                 0.38%       1,400        117,474        1,000      83,910          2,400        201,384
IMS Health Inc.                          0.07%       1,400         34,804                                   1,400         34,804
Lockheed Martin Corp.                    0.39%       2,500        128,500        1,500      77,100          4,000        205,600
Masco Corp.                              0.22%       2,500         68,525        1,700      46,597          4,200        115,122
Paychex, Inc.                            0.30%       1,700         63,240        2,500      93,000          4,200        156,240
Raytheon Co.                             0.09%       1,600         48,064                                   1,600         48,064
Southwest Airlines Co.                   0.20%       3,750         60,525        2,700      43,578          6,450        104,103
Transocean Inc. *                        0.11%                                   2,500      60,025          2,500         60,025
Tyco International Ltd.                  0.67%       6,397        169,521        7,000     185,500         13,397        355,021
Union Pacific Corp.                      0.26%       1,000         69,480        1,000      69,480          2,000        138,960
United Parcel Service, Inc., Class B     0.85%       2,500        186,375        3,500     260,925          6,000        447,300
United Technologies Corp.                0.49%         100         94,770        1,700     161,109          1,800        255,879
Waste Management, Inc.                   0.24%       2,500         74,000        1,700      50,320          4,200        124,320
                                                              -----------               -----------                   -----------
                                                                2,952,916                2,869,048                     5,821,964

INFORMATION TECHNOLOGY -                16.21%
Adobe Systems Inc.                       0.08%       1,100         43,230                                   1,100         43,230
Agere Systems Inc.,  Class A *           0.00%         125            381          115         351            240            732
Agere Systems Inc.,  Class B *           0.03%       3,068          8,897        2,830       8,207          5,898         17,104
Agilent Technologies, Inc.               0.18%       1,500         43,860        1,800      52,632          3,300         96,492
Altera Corp. *                           0.15%       1,900         43,130        1,500      34,050          3,400         77,180
Analog Devices, Inc.                     0.23%       1,700         77,605        1,000      45,650          2,700        123,255
Apple Computer, Inc. *                   0.06%       1,500         32,055                                   1,500         32,055
Applied Materials, Inc. *                0.33%       4,900        110,005        2,900      65,105          7,800        175,110
Cisco Systems, Inc. *                    1.68%      19,500        473,655       16,900     410,501         36,400        884,156
Computer Associates
  International, Inc.                    0.14%       2,700         73,818                                   2,700         73,818
Corning Inc. *                           0.06%                                   3,000      31,290          3,000         31,290
Dell Inc. *                              0.72%       4,700        159,612        6,500     220,740         11,200        380,352
Electronic Arts Inc. *                   0.18%       2,000         95,560                                   2,000         95,560




                                      -14-


Electronic Data Systems Corp.            0.16%       2,500         61,350        1,000      24,540          3,500         85,890
EMC Corp. *                              0.28%       4,500         58,140        7,000      90,440         11,500        148,580
First Data Corp.                         0.39%                                   5,000     205,450          5,000        205,450
Hewlett-Packard Co.                      0.69%       8,100        186,057        7,800     179,166         15,900        365,223
Intel Corp.                              2.27%      17,600        566,720       19,500     627,900         37,100      1,194,620
International Business Machines Corp.    1.92%       5,500        509,740        5,400     500,472         10,900      1,010,212
Linear Technology Corp.                  0.20%       1,500         63,105        1,000      42,070          2,500        105,175
LSI Logic Corp. *                        0.03%       1,500         13,305                                   1,500         13,305
Maxim Integrated Products, Inc.          0.22%       1,300         64,740        1,000      49,800          2,300        114,540
Micron Technology, Inc. *                0.13%       2,600         35,022        2,500      33,675          5,100         68,697
Microsoft Corp.                          3.05%      28,100        773,874       30,200     831,708         58,300      1,605,582
Motorola, Inc.                           0.37%       7,100         99,897        6,600      92,862         13,700        192,759
NVIDA Corp. *                            0.04%       1,000         23,250                                   1,000         23,250
Oracle Corp. *                           0.76%      17,800        234,960       12,300     162,360         30,100        397,320
QUALCOMM Inc.                            0.41%       1,500         80,895        2,500     134,825          4,000        215,720
Sanmina-SCI Corp. *                      0.06%                                   2,500      31,525          2,500         31,525
Siebel Systems, Inc. *                   0.07%                                   2,500      34,675          2,500         34,675
Solectron Corp. *                        0.08%       3,700         21,867        3,000      17,730          6,700         39,597
Sun Microsystems, Inc. *                 0.15%      10,000         44,900        7,500      33,675         17,500         78,575
SunGard Data Systems, Inc. *             0.13%       2,500         69,275                                   2,500         69,275
Texas Instruments Inc.                   0.58%       5,400        158,652        4,900     143,962         10,300        302,614
Yahoo! Inc. *                            0.38%       2,500        112,925        1,900      85,823          4,400        198,748
                                                              -----------               -----------                   -----------
                                                                4,340,482                4,191,184                     8,531,666

MATERIALS -                              2.44%
Air Products & Chemicals, Inc.           0.10%                                   1,000      52,830          1,000         52,830
Alcoa Inc.                               0.53%       4,200        159,600        3,100     117,800          7,300        277,400
Dow Chemical Co. (The)                   0.43%       2,700        112,239        2,700     112,239          5,400        224,478
E. I. du Pont de Nemours & Co.           0.48%       3,300        151,437        2,200     100,958          5,500        252,395
Georgia-Pacific Corp.                    0.12%       1,000         30,670        1,000      30,670          2,000         61,340
International Paper Co.                  0.37%       2,500        107,775        2,000      86,220          4,500        193,995
Praxair, Inc.                            0.22%                                   3,000     114,600          3,000        114,600
Rohm & Haas Co.                          0.08%       1,000         42,710                                   1,000         42,710
Weyerhaeuser Co.                         0.12%                                   1,000      64,000          1,000         64,000
                                                              -----------               -----------                   -----------
                                                                  604,431                  679,317                     1,283,748

TELECOMMUNICATION SERVICES -             3.55%
ALLTEL Corp                              0.13%       1,500         69,870                                   1,500         69,870
AT&T Corp.                               0.18%       2,260         45,878        2,400      48,720          4,660         94,598
AT&T Wireless Services Inc. *            0.20%       8,534         68,187        4,522      36,131         13,056        104,318
BellSouth Corp.                          0.67%       6,000        169,800        6,500     183,950         12,500        353,750
Lucent Technologies Inc. *               0.12%      11,600         32,944       10,700      30,388         22,300         63,332
Nextel Communications, Inc.,
  Class A *                              0.13%       2,500         70,150                                   2,500         70,150
SBC Communications Inc.                  0.54%       8,200        213,774        2,500      70,150         10,700        283,924
Sprint Corp. (FON Group)                 0.52%       4,000         65,680        7,900     205,953         11,900        271,633
Sprint Corp. (PCS Group) *               0.11%       1,800         10,116        3,000      49,260          4,800         59,376
Verizon Communications Inc.              0.94%       6,200        217,496        7,900     277,132         14,100        494,628
                                                              -----------               -----------                   -----------
                                                                  963,895                  901,684                     1,865,579



                                      -15-



UTILITIES -                              2.01%
American Electric Power Co., Inc.        0.16%       1,500         45,765        1,200      36,612          2,700         82,377
Dominion Resources, Inc.                 0.25%       1,100         70,213        1,000      63,830          2,100        134,043
Duke Energy Corp.                        0.21%       2,500         51,125        2,800      57,260          5,300        108,385
Edison International *                   0.17%       1,500         32,895        2,500      54,825          4,000         87,720
Exelon Corp.                             0.19%       1,500         99,540                                   1,500         99,540
FirstEnergy Corp.                        0.17%                                   2,500      88,000          2,500         88,000
FPL Group, Inc.                          0.12%       1,000         65,420                                   1,000         65,420
Progress Energy, Inc.                    0.09%       1,000         45,260                                   1,000         45,260
Public Service Enterprises Group Inc,    0.08%       1,000         43,800                                   1,000         43,800
Scottish Power plc, ADR                  0.21%                                   4,000     108,720          4,000        108,720
Southern Co. (The)                       0.14%                                   2,400      72,600          2,400         72,600
TXU Corp.                                0.10%       1,200         28,464        1,000      23,720          2,200         52,184
Xcel Energy, Inc.                        0.13%       1,600         27,168        2,500      42,450          4,100         69,618
                                                              -----------               -----------                   -----------
                                                                  509,650                  548,017                     1,057,667

TOTAL EQUITY SECURITIES                 99.51%                 25,929,314               26,435,672                    52,364,986
                                                              -----------               -----------                   -----------

SHORT-TERM INVESTMENTS -                 2.30%
   REPURCHASE AGREEMENTS -               2.30%
Bear, Stearns & Co. Inc.                 0.26%     138,234        138,234                                 138,234        138,234
(Agreement dated 12/31/03 to
be repurchased at $138,241),
0.85%,  01/02/04

Bear, Stearns & Co. Inc.                 0.83%     438,900        438,900                                 438,900        438,900
(Agreement dated 12/31/03 to
be repurchased at $438,926),
1.06%**, 01/02/04 ***

Bear, Stearns & Co. Inc.                 0.00%       2,278          2,278                                   2,278          2,278
(Agreement dated 12/31/03 to
be repurchased at $2,278),
0.94%**, 01/02/04 ***



                                      -16-



Bear, Stearns & Co. Inc.                 0.27%                                 139,977     139,977        139,977        139,977
(Agreement dated 12/31/03 to
be repurchased at $139,984),
0.85%,  01/02/04

Bear, Stearns & Co. Inc.                 0.81%                                 425,588     425,588        425,588        425,588
(Agreement dated 12/31/03 to
be repurchased at $425,613),
1.06%**,  01/02/04 ***

Bear, Stearns & Co. Inc.                 0.12%                                  65,644      65,644         65,644         65,644
(Agreement dated 12/31/03 to
be repurchased at $65,647),
0.94%**,  01/02/04 ***
                                                              -----------               -----------                   -----------

TOTAL SHORT-TERM INVESTMENTS             2.30%                    579,412                  631,209                     1,210,621


                                                              -----------               -----------                   -----------
TOTAL INVESTMENTS AT MARKET            101.81%                 26,508,726               27,066,881                    53,575,607
                                                              -----------               -----------                   -----------
TOTAL INVESTMENTS AT COST                                      29,716,897               24,952,427                    54,669,324
                                                              -----------               -----------                   -----------

@      No adjustments are shown to the unaudited pro forma combined portfolio of
       investments due to the fact that upon consummation of the merger,
       securities would need to be sold in order for Acquiring Fund to comply
       with its prospectus restrictions. The foregoing sentence shall not
       restrict in any way the ability of the investment adviser of any of the
       funds from buying or selling securities in the normal course of such
       fund's business and operations.

*     Non-income producing securities

**   Stated interest rate, before rebate earned by borrower of securities on loan

*** Represents investment purchased with cash collateral received for securities
    on loan.

ADR  American Depositary Receipt





                                      -17-






------------------------------------------------------------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
Pro Forma
Portfolio of Investments (@)
December 31, 2003
(Unaudited)
                                                TARGET FUNDS          ACQUIRING FUND           Pro Forma
                                   % of                 PGF                 MGC                  CLM              Combined Fund
                                    Net       Shares/  Market       Shares/    Market    Shares/     Market     Shares/    Market
                                  Assets        Par   Value ($)      Par      Value ($)    Par       Value        Par     Value ($)
                                ----------------------------------------------------------------------------------------------------
EQUITY SECURITIES                 95.21%

CLOSED-END DOMESTIC FUNDS -        2.04%
Adams Express Co.                  0.38%                                                  49,500     614,295     49,500      614,295
General American
  Investor Co. Inc.                0.19%                                                  10,500     312,165     10,500      312,165
Salomon Brothers Fund,
  Inc. (The)                       0.14%                                                  18,400     221,352     18,400      221,352
Tri-Continental Corp.              0.78%      38,000    623,200                           39,000     639,600     77,000    1,262,800
Zweig Fund, Inc.                   0.54%      66,200    324,380                          110,400     540,960    176,600      865,340
                                                     ----------            ------------           ----------           -------------
                                                        947,580                      0             2,328,372              3,275,952

CONSUMER DISCRETIONARY -          13.68%
Bed Bath & Beyond Inc. *           0.03%                                                  1,000       43,350     1,000       43,350
Best Buy Co., Inc.                 0.07%       1,250     65,300                           1,000       52,240     2,250      117,540
Carnival Corp.                     0.12%       2,700    107,271                           2,100       83,433     4,800      190,704
Carter's, Inc.*                    0.04%                             2,500      63,625                           2,500       63,625
Circuit City Stores, Inc.          0.01%       1,000     10,130                                                  1,000       10,130
Clear Channel
  Communications, Inc.             0.14%       2,700    126,441                           2,100       98,343     4,800      224,784
Comcast Corp., Class A *           0.15%       3,655    120,140                           3,882      127,601     7,537      247,741
Comcast Corp., Special
  Class A*                         0.08%       4,100    128,248                                                  4,100      128,248
Costco Wholesale Corp. *           0.03%                                                  1,500       55,770     1,500       55,770
CVS Corp.                          0.06%       1,000     36,120                           1,500       54,180     2,500       90,300
Delphi Corp.                       0.03%       2,600     26,546                           2,000       20,420     4,600       46,966
Eastman Kodak Co.                  0.02%       1,400     35,938                                                  1,400       35,938
Federated Department
  Stores, Inc.                     0.03%       1,000     47,130                                                  1,000       47,130
Ford Motor Co.                     0.12%       5,800     92,800                           6,500      104,000    12,300      196,800
Fortune Brands, Inc.               0.04%                                                  1,000       71,490     1,000       71,490
Furniture Brands
  International, Inc.              1.82%                           100,100   2,935,933                         100,100    2,935,933
Gannett Co., Inc.                  0.06%                                                  1,000       89,160     1,000       89,160
Gap, Inc. (The)                    0.08%       2,500     58,025                           2,700       62,667     5,200      120,692
General Motors Corp.               0.15%       2,600    138,840                           1,900      101,460     4,500      240,300
Gildan Activewear Inc.,
  Class A*                         0.99%                            51,500   1,590,320                          51,500    1,590,320
Goodyear Tire & Rubber
  Co. (The) *                      0.01%                                                  2,500       19,650     2,500       19,650
Harley-Davidson, Inc.              0.07%       1,400     66,542                           1,000       47,530     2,400      114,072
Hilton Hotels Corp.                0.03%       1,700     29,121                           1,500       25,695     3,200       54,816



                                      -18-


Home Depot, Inc. (The)             0.30%       7,500    266,175                           6,100      216,489    13,600      482,664
Kohl's Corp. *                     0.06%       1,000     44,940                           1,000       44,940     2,000       89,880
Limited Brands                     0.03%       2,500     45,075                                                  2,500       45,075
Lowe's Companies, Inc.             0.17%       2,500    138,475                           2,500      138,475     5,000      276,950
Marriott International,
  Inc., Class A                    0.06%       1,100     50,820                           1,000       46,200     2,100       97,020
Martek Biosciences Corp.*          1.23%                            30,500   1,981,585                          30,500    1,981,585
Mattel, Inc.                       0.02%       1,500     28,905                                                  1,500       28,905
May Department Stores Co.
  (The)                            0.04%       1,400     40,698                           1,000       29,070     2,400       69,768
McDonald's Corp.                   0.09%       4,000     99,320                           2,100       52,143     6,100      151,463
Monsanto Co.                       0.01%         580     16,692                                                    580       16,692
Multimedia Games, Inc.*            1.10%                            43,000   1,767,300                          43,000    1,767,300
NIKE, Inc., Class B                0.10%       1,300     88,998                           1,000       68,460     2,300      157,458
Omnicom Group Inc.                 0.09%         600     52,398                           1,000       87,330     1,600      139,728
Reebok International Ltd.          0.04%                                                  1,500       58,980     1,500       58,980
Sears, Roebuck & Co.               0.05%       1,600     72,784                                                  1,600       72,784
Staples, Inc. *                    0.05%       1,500     40,950                           1,500       40,950     3,000       81,900
Starbucks Corp. *                  0.06%       1,700     56,202                           1,200       39,672     2,900       95,874
Target Corp.                       0.11%       1,600     61,440                           3,200      122,880     4,800      184,320
The Cheesecake Factory Inc.*       1.03%                            37,700   1,659,931                          37,700    1,659,931
Thor Industries, Inc.              1.01%                            28,800   1,619,136                          28,800    1,619,136
Time Warner Inc. *                 0.28%      14,250    256,358                          10,500      188,895    24,750      445,253
TJX Companies, Inc. (The)          0.03%       2,500     55,125                                                  2,500       55,125
Toys "R" Us, Inc.*                 0.01%       1,000     12,640                                                  1,000       12,640
Tractor Supply Company*            0.46%                            19,200     746,688                          19,200      746,688
United Natural Foods, Inc.*        1.77%                            79,200   2,844,072                          79,200    2,844,072
Viacom Inc., non-voting
  Class B                          0.31%       5,400    239,652                           6,000      266,280    11,400      505,932
Wal-Mart Stores, Inc.              0.80%      11,000    583,550                          13,300      705,565    24,300    1,289,115
Walt Disney Co. (The)              0.16%       6,500    151,645                           4,700      109,651    11,200      261,296
Yum! Brands, Inc. *                0.02%                                                  1,000       34,400     1,000       34,400
                                                     ----------            ------------           ----------           -------------
                                                      3,491,434             15,208,590             3,307,369             22,007,393

CONSUMER STAPLES -                 5.22%
Albertson's, Inc.                  0.04%                                                  2,500       56,625     2,500       56,625
Altria Group, Inc.                 0.31%       4,400    239,448                           4,900      266,658     9,300      506,106
Anheuser-Busch Companies,
  Inc.                             0.15%       2,500    131,700                           2,200      115,896     4,700      247,596
Archer-Daniels-Midland Co.         0.05%       3,045     46,345                           2,415       36,756     5,460       83,101
Campbell Soup Co.                  0.03%       2,000     53,600                                                  2,000       53,600
Coca-Cola Co. (The)                0.40%       6,300    319,725                           6,500      329,875    12,800      649,600
Coca-Cola Enterprises Inc.         0.02%       1,500     32,805                                                  1,500       32,805
Colgate-Palmolive Co.              0.07%       1,100     55,055                           1,000       50,050     2,100      105,105
ConAgra Foods, Inc.                0.07%       2,500     65,975                           1,900       50,141     4,400      116,116
General Mills, Inc.                0.07%                                                  2,500      113,250     2,500      113,250
Gillette Co. (The)                 0.13%       3,000    110,190                           2,600       95,498     5,600      205,688



                                      -19-


H.J. Heinz Co.                     0.04%       1,600     58,288                                                  1,600       58,288
Kimberly-Clark Corp.               0.12%       2,500    147,725                             900       53,181     3,400      200,906
Kroger Co. (The) *                 0.06%       1,300     24,063                           3,500       64,785     4,800       88,848
Panera Bread Co. Class A*          1.04%                            42,300   1,672,119                          42,300    1,672,119
Pepsi Bottling Group, Inc.         0.02%       1,000     24,180                                                  1,000       24,180
PepsiCo, Inc.                      0.26%       4,000    186,480                           5,100      237,762     9,100      424,242
Performance Food Group Co.*        0.88%                            39,300   1,421,481                          39,300    1,421,481
Philadelphia Suburban Corp.        0.73%                            53,077   1,173,002                          53,077    1,173,002
Procter & Gamble Co. (The)         0.42%       3,000    299,640                           3,800      379,544     6,800      679,184
Safeway Inc.*                      0.03%       2,500     54,775                                                  2,500       54,775
Sara Lee Corp.                     0.02%       1,300     28,223                                                  1,300       28,223
Sysco Corp.                        0.13%       2,500     93,075                           3,300      122,859     5,800      215,934
Walgreen Co.                       0.12%       2,100     76,398                           3,200      116,416     5,300      192,814
                                                     ----------            ------------                                -------------
                                                      2,047,690              4,266,602             2,089,296              8,403,588

ENERGY -                           5.40%
Anadarko Petroleum Corp.           0.07%       1,200     61,212                             900       45,909     2,100      107,121
Baker Hughes Inc.                  0.07%       1,100     35,376                           2,500       80,400     3,600      115,776
CenterPoint Energy, Inc.           0.02%       1,400     13,566                           2,500       24,225     3,900       37,791
ChevronTexaco Corp.                0.41%       4,325    373,637                           3,340      288,543     7,665      662,180
ConocoPhillips                     0.17%       2,509    164,515                           1,728      113,305     4,237      277,820
El Paso  Corp.                     0.01%       2,500     20,475                                                  2,500       20,475
Exxon Mobil Corp.                  0.90%      16,500    676,500                          19,000      779,000    35,500    1,455,500
FMC Technologies, Inc.*            1.53%                           105,800   2,465,140                         105,800    2,465,140
Marathon Oil Corp.                 0.03%       1,500     49,635                                                  1,500       49,635
Reliant Resources, Inc. *          0.01%       1,104      8,125                           1,971       14,506     3,075       22,631
Schlumberger Ltd.                  0.16%       2,600    142,272                           2,000      109,440     4,600      251,712
Ultra Petroleum Corp.*             1.23%                            80,300   1,976,986                          80,300    1,976,986
Unocal Corp.                       0.00%                                                                             0            0
Western Gas Resources,
  Inc.                             0.75%                            25,400   1,200,150                          25,400    1,200,150
Unocal Corp.                       0.03%       1,200     44,196                                                  1,200       44,196
                                                     ----------            ------------           ----------           -------------
                                                      1,589,509              5,642,276             1,455,328              8,687,113

FINANCIALS -                      12.15%
Affiliated Managers
  Group, Inc.*                     1.75%                            40,400   2,811,436                          40,400    2,811,436
AFLAC Inc.                         0.10%       2,600     94,068                           1,900       68,742     4,500      162,810
Allstate Corp. (The)               0.16%       3,300    141,966                           2,500      107,550     5,800      249,516
American Express Co.               0.21%       4,100    197,743                           3,000      144,690     7,100      342,433
American International
  Group, Inc.                      0.62%       5,989    396,951                           9,042      599,304    15,031      996,255
Aon Corp.                          0.02%       1,200     28,728                                                  1,200       28,728
Bank of America Corp.              0.41%       4,300    345,849                           3,900      313,677     8,200      659,526
Bank of New York Co.,
  Inc. (The)                       0.12%       3,400    112,608                           2,500       82,800     5,900      195,408
Bank One Corp.                     0.15%       2,800    127,652                           2,600      118,534     5,400      246,186



                                      -20-


BB&T Corp.                         0.04%                                                  1,600       61,824     1,600       61,824
Charles Schwab Corp. (The)         0.04%       3,500     41,440                           2,500       29,600     6,000       71,040
Citigroup Inc.                     0.79%      13,000    631,020                          13,100      635,874    26,100    1,266,894
Direct General Corp.               0.84%                            41,000   1,357,100                          41,000    1,357,100
Fannie Mae                         0.17%       1,500    112,590                           2,200      165,132     3,700      277,722
Fifth Third Bancorp                0.15%       2,000    118,200                           2,000      118,200     4,000      236,400
First Niagara Financial
  Group, Inc.                      0.78%                            84,000   1,252,440                          84,000    1,252,440
FleetBoston Financial Corp.        0.18%       4,100    178,965                           2,400      104,760     6,500      283,725
Franklin Resources, Inc.           0.04%       1,200     62,472                                                  1,200       62,472
Freddie Mac                        0.15%       1,600     93,312                           2,500      145,800     4,100      239,112
Goldman Sachs Group,
  Inc. (The)                       0.17%       1,500    148,095                           1,300      128,349     2,800      276,444
Hartford Financial
  Services Group, Inc. (The)       0.04%       1,000     59,030                                                  1,000       59,030
HSBC Holdings plc, ADR             0.11%       1,337    105,382                             963       75,904     2,300      181,286
J. P. Morgan Chase & Co.           0.28%       6,200    227,726                           6,000      220,380    12,200      448,106
John Hancock Financial
  Services, Inc.                   0.06%       2,500     93,750                                                  2,500       93,750
Lehman Brothers Holdings Inc.      0.05%       1,100     84,942                                                  1,100       84,942
Marsh & McLennan Companies,
  Inc.                             0.20%       2,600    124,514                           4,000      191,560     6,600      316,074
MBNA Corp.                         0.08%       2,100     52,185                           3,000       74,550     5,100      126,735
Mellon Financial Corp.             0.09%       2,500     80,275                           1,800       57,798     4,300      138,073
Merrill Lynch & Co., Inc.          0.21%       3,700    217,005                           2,000      117,300     5,700      334,305
MetLife, Inc.                      0.13%       3,500    117,845                           2,700       90,909     6,200      208,754
Morgan Stanley                     0.22%       2,500    144,675                           3,500      202,545     6,000      347,220
National City Corp.                0.10%       2,500     84,850                           2,200       74,668     4,700      159,518
National Financial Partners
  Corp.                            0.69%                            40,500   1,115,775                          40,500    1,115,775
Northern Trust Corp.               0.03%       1,000     46,420                                                  1,000       46,420
Platinum Underwriters
  Holdings, Ltd.                   1.35%                            72,600   2,178,000                          72,600    2,178,000
PNC Financial Services Group       0.04%                                                  1,100       60,203     1,100       60,203
Prudential Financial, Inc.         0.06%                                                  2,500      104,425     2,500      104,425
Scottish Re Group Ltd.             0.30%                            22,900     475,862                          22,900      475,862
St. Paul Companies, Inc.
  (The)                            0.02%       1,000     39,650                                                  1,000       39,650
State Street Corp.                 0.03%                                                  1,000       52,080     1,000       52,080
SunTrust Banks, Inc.               0.05%                                                  1,100       78,650     1,100       78,650
The First Marblehead Corp. *       0.17%                            12,600     275,688                          12,600      275,688
Travelers Property Casualty
  Corp., Class A                   0.02%         712     11,947                             738       12,383     1,450       24,330
Travelers Property Casualty
  Corp., Class B                   0.03%       1,464     24,844                           1,517       25,743     2,981       50,587
U.S. Bancorp                       0.19%       6,201    184,666                           4,200      125,076    10,401      309,742
UnumProvident Corp.                0.01%       1,100     17,347                                                  1,100       17,347
Wachovia Corp.                     0.19%       3,000    139,770                           3,600      167,724     6,600      307,494
Washington Mutual, Inc.            0.15%       2,800    112,336                           3,150      126,378     5,950      238,714
Wells Fargo & Co.                  0.37%       5,400    318,006                           4,800      282,672    10,200      600,678
                                                     ----------            ------------           ----------           -------------
                                                      5,118,824              9,466,301             4,965,784             19,550,909



                                      -21-



HEALTHCARE -                      12.52%
Abbott Laboratories                0.20%       3,000    139,800                           4,000      186,400     7,000      326,200
Allergan, Inc.                     0.05%       1,000     76,810                                                  1,000       76,810
Amgen Inc. *                       0.30%       4,300    265,740                           3,500      216,300     7,800      482,040
Baxter International Inc.          0.10%       2,800     85,456                           2,500       76,300     5,300      161,756
Becton, Dickinson & Co.            0.03%       1,200     49,368                                                  1,200       49,368
Boston Scientific Corp. *          0.11%       2,000     73,520                           3,000      110,280     5,000      183,800
Bristol-Myers Squibb Co.           0.19%       6,400    183,040                           4,500      128,700    10,900      311,740
Cardinal Health, Inc.              0.11%       1,950    119,262                           1,000       61,160     2,950      180,422
Cooper Companies, Inc              1.76%                            60,000   2,827,800                          60,000    2,827,800
Edwards Lifesciences               1.68%                            89,900   2,704,192                          89,900    2,704,192
Eli Lilly & Co.                    0.25%       2,800    196,924                           3,000      210,990     5,800      407,914
Guidant Corp.                      0.05%       1,400     84,280                                                  1,400       84,280
HCA Inc.                           0.09%       1,500     64,440                           2,000       85,920     3,500      150,360
HEALTHSOUTH Corp. *                0.01%       1,800      8,244                           2,500       11,450     4,300       19,694
IDEXX Laboratories, Inc.*          1.05%                            36,400   1,684,592                          36,400    1,684,592
Integra Lifesciences Holdings*     1.41%                            79,500   2,276,085                          79,500    2,276,085
Johnson & Johnson                  0.48%       7,500    387,450                           7,500      387,450    15,000      774,900
McKesson Corp.                     0.05%       1,300     41,808                           1,000       32,160     2,300       73,968
Medco Health Solutions, Inc. *     0.04%         964     32,766                             723       24,575     1,687       57,341
Medtronic, Inc.                    0.25%       4,000    194,440                           4,300      209,023     8,300      403,463
Merck & Co. Inc.                   0.33%       5,500    254,100                           6,000      277,200    11,500      531,300
Neurocrine Biosciences, Inc. *     1.07%                            31,700   1,728,918                          31,700    1,728,918
NPS Pharmaceuticals, Inc.*         1.53%                            80,000   2,459,200                          80,000    2,459,200
Pfizer Inc.                        0.89%      19,860    701,654                          20,500      724,265    40,360    1,425,919
Schering-Plough Corp.              0.07%       4,200     73,038                           2,500       43,475     6,700      116,513
Tenet Heathcare Corp. *            0.02%       2,250     36,113                                                  2,250       36,113
UnitedHealth Group Inc.            0.18%       2,000    116,360                           3,000      174,540     5,000      290,900
Wyeth                              0.20%       4,200    178,290                           3,300      140,085     7,500      318,375
                                                                           ------------           ----------           -------------
                                                      3,362,903             13,680,787             3,100,273             20,143,963

INDUSTRIALS -                     12.57%
3M Co.                             0.23%       2,400    204,072                           2,000      170,060     4,400      374,132
Automatic Data Processing, Inc.    0.12%       2,900    114,869                           2,000       79,220     4,900      194,089
Boeing Co. (The)                   0.15%       2,600    109,564                           3,000      126,420     5,600      235,984
Caterpillar Inc.                   0.15%       1,600    132,832                           1,300      107,926     2,900      240,758
Cendant Corp. *                    0.08%       3,300     73,491                           2,700       60,129     6,000      133,620
Central Freight Lines, Inc.*       0.04%                             3,300      58,575                           3,300       58,575
Compass Minerals
  International, Inc.*             0.47%                            52,700     752,556                          52,700      752,556
Concord EFS, Inc. *                0.05%       2,500     37,100                           2,500       37,100     5,000       74,200
CSX Corp.                          0.02%       1,000     35,940                                                  1,000       35,940
DSP Group, Inc.*                   2.10%                           135,600   3,377,796                         135,600    3,377,796
EDO Corp.                          0.87%                            56,500   1,392,725                          56,500    1,392,725
Emerson Electric Co.               0.14%       2,000    129,500                           1,500       97,125     3,500      226,625



                                      -22-


FedEx Corp.                        0.08%       1,000     67,500                           1,000       67,500     2,000      135,000
General Dynamics Corp.             0.03%         600     54,234                                                    600       54,234
General Electric Co.               1.06%      26,200    811,676                          29,000      898,420    55,200    1,710,096
Heartland Express, Inc.            0.94%                            62,337   1,507,932                          62,337    1,507,932
Honeywell International Inc.       0.10%       2,000     66,860                           2,800       93,604     4,800      160,464
Illinois Tool Works Inc.           0.13%       1,400    117,474                           1,000       83,910     2,400      201,384
IMS Health Inc.                    0.02%       1,400     34,804                                                  1,400       34,804
Lockheed Martin Corp.              0.13%       2,500    128,500                           1,500       77,100     4,000      205,600
Masco Corp.                        0.07%       2,500     68,525                           1,700       46,597     4,200      115,122
Overnight Corp.*                   0.08%                             5,600     127,400                           5,600      127,400
Paychex, Inc.                      0.10%       1,700     63,240                           2,500       93,000     4,200      156,240
Quanta Services, Inc.*             0.32%                            70,000     511,000                          70,000      511,000
Raytheon Co.                       0.03%       1,600     48,064                                                  1,600       48,064
Shuffle Master, Inc.*              1.58%                            73,400   2,541,108                          73,400    2,541,108
Southwest Airlines Co.             0.06%       3,750     60,525                           2,700       43,578     6,450      104,103
Swift Transportation Co., Inc.*    0.88%                            67,100   1,410,442                          67,100    1,410,442
Transocean Inc. *                  0.04%                                                  2,500       60,025     2,500       60,025
Tyco International Ltd.            0.22%       6,397    169,521                           7,000      185,500    13,397      355,021
Union Pacific Corp.                0.09%       1,000     69,480                           1,000       69,480     2,000      138,960
United Parcel Service, Inc.,
  Class B                          0.28%       2,500    186,375                           3,500      260,925     6,000      447,300
United Technologies Corp.          0.16%         100     94,770                           1,700      161,109     1,800      255,879
Universal Technical Institute
  Inc.*                            0.15%                             8,200     246,000                           8,200      246,000
USF Corp.                          1.54%                            72,600   2,482,194                          72,600    2,482,194
Waste Management, Inc.             0.08%       2,500     74,000                           1,700       50,320     4,200      124,320
                                                     ----------            ------------           ----------           -------------
                                                      2,952,916             14,407,728             2,869,048             20,229,692

INFORMATION TECHNOLOGY -          21.81%
Adobe Systems Inc.                 0.03%       1,100     43,230                                                  1,100       43,230
Agere Systems Inc.,
  Class A *                        0.00%         125        381                             115          351       240          732
Agere Systems Inc.,
  Class B *                        0.01%       3,068      8,897                           2,830        8,207     5,898       17,104
Agilent Technologies, Inc.         0.06%       1,500     43,860                           1,800       52,632     3,300       96,492
Altera Corp. *                     0.05%       1,900     43,130                           1,500       34,050     3,400       77,180
Analog Devices, Inc.               0.08%       1,700     77,605                           1,000       45,650     2,700      123,255
Apple Computer, Inc. *             0.02%       1,500     32,055                                                  1,500       32,055
Applied Films Corp                 1.27%                            62,000   2,047,240                          62,000    2,047,240
Applied Materials, Inc. *          0.11%       4,900    110,005                           2,900       65,105     7,800      175,110
Avocent Corporation                1.60%                            70,500   2,574,660                          70,500    2,574,660
Caci International Inc.
  Class A                          1.63%                            54,100   2,630,342                          54,100    2,630,342
Callidus Software*                 0.04%                             3,300      58,377                           3,300       58,377
Cisco Systems, Inc. *              0.55%      19,500    473,655                          16,900      410,501    36,400      884,156
Computer Associates
  International, Inc.              0.05%       2,700     73,818                                                  2,700       73,818
Corning Inc. *                     0.02%                                                  3,000       31,290     3,000       31,290
Dell Inc. *                        0.24%       4,700    159,612                           6,500      220,740    11,200      380,352



                                      -23-


Electronic Arts Inc. *             0.06%       2,000     95,560                                                  2,000       95,560
Electronic Data Systems
  Corp.                            0.05%       2,500     61,350                           1,000       24,540     3,500       85,890
EMC Corp. *                        2.95%       4,500     58,140    355,830   4,597,324    7,000       90,440   367,330    4,745,904
Enterasys Networks, Inc.*          1.31%                           562,100   2,107,875                         562,100    2,107,875
Equinix, Inc.*                     0.29%                            16,500     465,300                          16,500      465,300
Fairchild Semiconductor
  International, Inc.*             3.13%                           201,600   5,033,952                         201,600    5,033,952
First Data Corp.                   0.13%                                                  5,000      205,450     5,000      205,450
Harris Interactive Inc.*           0.79%                           152,200   1,263,260                         152,200    1,263,260
Hewlett-Packard Co.                0.23%       8,100    186,057                           7,800      179,166    15,900      365,223
Intel Corp.                        0.74%      17,600    566,720                          19,500      627,900    37,100    1,194,620
International Business
  Machines Corp.                   0.63%       5,500    509,740                           5,400      500,472    10,900    1,010,212
ITT Educational Services,
  Inc.*                            1.20%                            41,200   1,935,164                          41,200    1,935,164
Linear Technology Corp.            0.07%       1,500     63,105                           1,000       42,070     2,500      105,175
LSI Logic Corp. *                  0.01%       1,500     13,305                                                  1,500       13,305
Maxim Integrated Products,
  Inc.                             0.07%       1,300     64,740                           1,000       49,800     2,300      114,540
Micron Technology, Inc. *          0.04%       2,600     35,022                           2,500       33,675     5,100       68,697
Microsoft Corp.                    1.00%      28,100    773,874                          30,200      831,708    58,300    1,605,582
Motorola, Inc.                     0.12%       7,100     99,897                           6,600       92,862    13,700      192,759
NVIDA Corp. *                      0.01%       1,000     23,250                                                  1,000       23,250
Oracle Corp. *                     0.25%      17,800    234,960                          12,300      162,360    30,100      397,320
QUALCOMM Inc.                      0.13%       1,500     80,895                           2,500      134,825     4,000      215,720
Sanmina-SCI Corp. *                0.02%                                                  2,500       31,525     2,500       31,525
Siebel Systems, Inc. *             0.02%                                                  2,500       34,675     2,500       34,675
Skyworks Solutions, Inc.*          0.97%                           179,100   1,558,170                         179,100    1,558,170
Solectron Corp. *                  0.02%       3,700     21,867                           3,000       17,730     6,700       39,597
Sun Microsystems, Inc. *           0.05%      10,000     44,900                           7,500       33,675    17,500       78,575
SunGard Data Systems, Inc. *       0.04%       2,500     69,275                                                  2,500       69,275
Texas Instruments Inc.             0.19%       5,400    158,652                           4,900      143,962    10,300      302,614
Yahoo! Inc. *                      0.12%       2,500    112,925                           1,900       85,823     4,400      198,748
Zoran Corp.*                       1.42%                           131,750   2,291,133                         131,750    2,291,133
                                                     ----------            ------------           ----------           -------------
                                                      4,340,482             26,562,796             4,191,184             35,094,462

MATERIALS -                        7.86%
Air Products & Chemicals,
  Inc.                             0.03%                                                  1,000       52,830     1,000       52,830
Alcoa Inc.                         0.17%       4,200    159,600                           3,100      117,800     7,300      277,400
Dow Chemical Co. (The)             0.14%       2,700    112,239                           2,700      112,239     5,400      224,478
E. I. du Pont de Nemours & Co.     0.16%       3,300    151,437                           2,200      100,958     5,500      252,395
General Cable Corp.*               0.63%                           124,200   1,012,230                         124,200    1,012,230
Georgia-Pacific Corp.              0.04%       1,000     30,670                           1,000       30,670     2,000       61,340
International Paper Co.            0.12%       2,500    107,775                           2,000       86,220     4,500      193,995
Joy Global Inc.                    1.85%                           114,100   2,983,715                         114,100    2,983,715
Packaging Corp of America          1.76%                           129,600   2,833,056                         129,600    2,833,056
Peabody Energy Corp.               1.74%                            67,000   2,794,570                          67,000    2,794,570




                                      -24-


Praxair, Inc.                      0.07%                                                  3,000      114,600     3,000      114,600
Rohm & Haas Co.                    0.03%       1,000     42,710                                                  1,000       42,710
Steel Dynamics, Inc.*              1.08%                            74,300   1,745,307                          74,300    1,745,307
Weyerhaeuser Co.                   0.04%                                                  1,000       64,000     1,000       64,000
                                                     ----------            ------------           ----------           -------------
                                                        604,431             11,368,878               679,317             12,652,626

TELECOMMUNICATION SERVICES -       1.30%
ALLTEL Corp                        0.04%       1,500     69,870                                                  1,500       69,870
AT&T Corp.                         0.06%       2,260     45,878                           2,400       48,720     4,660       94,598
AT&T Wireless Services Inc. *      0.06%       8,534     68,187                           4,522       36,131    13,056      104,318
BellSouth Corp.                    0.22%       6,000    169,800                           6,500      183,950    12,500      353,750
Journal Communications, Inc.       0.14%                            12,000     222,360                          12,000      222,360
Lucent Technologies Inc. *         0.04%      11,600     32,944                          10,700       30,388    22,300       63,332
Nextel Communications, Inc.,
  Class A *                        0.04%       2,500     70,150                                                  2,500       70,150
SBC Communications Inc.            0.18%       8,200    213,774                           2,500       70,150    10,700      283,924
Sprint Corp. (FON Group)           0.17%       4,000     65,680                           7,900      205,953    11,900      271,633
Sprint Corp. (PCS Group) *         0.04%       1,800     10,116                           3,000       49,260     4,800       59,376
Verizon Communications Inc.        0.31%       6,200    217,496                           7,900      277,132    14,100      494,628
                                                                           ------------           ----------           -------------
                                                        963,895                222,360               901,684              2,087,939

UTILITIES -                        0.66%
American Electric Power Co.,
  Inc.                             0.05%       1,500     45,765                           1,200       36,612     2,700       82,377
Dominion Resources, Inc.           0.08%       1,100     70,213                           1,000       63,830     2,100      134,043
Duke Energy Corp.                  0.07%       2,500     51,125                           2,800       57,260     5,300      108,385
Edison International *             0.05%       1,500     32,895                           2,500       54,825     4,000       87,720
Exelon Corp.                       0.06%       1,500     99,540                                                  1,500       99,540
FirstEnergy Corp.                  0.05%                                                  2,500       88,000     2,500       88,000
FPL Group, Inc.                    0.04%       1,000     65,420                                                  1,000       65,420
Progress Energy, Inc.              0.03%       1,000     45,260                                                  1,000       45,260
Public Service Enterprises
  Group Inc,                       0.03%       1,000     43,800                                                  1,000       43,800
Scottish Power plc, ADR            0.07%                                                  4,000      108,720     4,000      108,720
Southern Co. (The)                 0.05%                                                  2,400       72,600     2,400       72,600
TXU Corp.                          0.03%       1,200     28,464                           1,000       23,720     2,200       52,184
Xcel Energy, Inc.                  0.04%       1,600     27,168                           2,500       42,450     4,100       69,618
                                                     ----------            ------------           ----------           ------------
                                                        509,650                      0               548,017              1,057,667

TOTAL EQUITY SECURITIES           95.21%             25,929,314            100,826,318            26,435,672            153,191,304
                                                     ----------            ------------           ----------           ------------

SHORT-TERM INVESTMENTS -          21.34%
   REPURCHASE AGREEMENTS -        21.34%
Bear, Stearns & Co. Inc.           0.09%     138,234    138,234                                                138,234      138,234
(Agreement dated 12/31/03 to
be repurchased at $138,241),
0.85%,  01/02/04



                                      -25-



Bear, Stearns & Co. Inc.           0.27%     438,900    438,900                                                438,900      438,900
(Agreement dated 12/31/03 to
be repurchased at $438,926),
1.06%**, 01/02/04 ***

Bear, Stearns & Co. Inc.           0.00%       2,278      2,278                                                  2,278        2,278
(Agreement dated 12/31/03 to
be repurchased at $2,278),
0.94%**, 01/02/04 ***

Bear, Stearns & Co. Inc.           4.89%                         7,867,525   7,867,525                       7,867,525    7,867,525
(Agreement dated 12/31/03 to
be repurchased at $7,867,897)
0.85%, 01/02/04

Bear, Stearns & Co. Inc.          14.84%                        23,869,214  23,869,214                      23,869,214   23,869,214
(Agreement dated 12/31/03 to
be repurchased at $23,870,620)
1.06%**, 01/02/04***

Bear, Stearns & Co. Inc.           0.86%                         1,380,273   1,380,273                       1,380,273    1,380,273
(Agreement dated 12/31/03 to
be repurchased at $1,380,345)
0.94%**, 01/02/04***

Bear, Stearns & Co. Inc.           0.09%                                                139,977      139,977   139,977      139,977
(Agreement dated 12/31/03 to
be repurchased at $139,984),
0.85%,  01/02/04

Bear, Stearns & Co. Inc.           0.26%                                                425,588      425,588   425,588      425,588
(Agreement dated 12/31/03 to
be repurchased at $425,613),
1.06%**,  01/02/04 ***

Bear, Stearns & Co. Inc.           0.04%                                                 65,644       65,644   65,644       65,644
(Agreement dated 12/31/03 to
be repurchased at $65,647),
0.94%**,  01/02/04 ***
                                                     ----------            ------------          -----------           -----------

TOTAL SHORT-TERM INVESTMENTS      21.34%                579,412             33,117,012               631,209            34,327,633


                                                     ----------            ------------          -----------           -----------
TOTAL INVESTMENTS AT MARKET      116.55%             26,508,726            133,943,330            27,066,881           187,518,937
                                                     ----------            ------------          -----------           -----------
TOTAL INVESTMENTS AT COST                            29,716,897            108,743,027            24,952,427           163,412,351
                                                     ----------            ------------          -----------           -----------

@      No adjustments are shown to the unaudited pro forma combined portfolio of
       investments due to the fact that upon consummation of the merger,
       securities would need to be sold in order for Acquiring Fund to comply
       with its prospectus restrictions. The foregoing sentence shall not
       restrict in any way the ability of the investment adviser of any of the
       funds from buying or selling securities in the normal course of such
       fund's business and operations.

*     Non-income producing securities

**   Stated interest rate, before rebate earned by borrower of securities on loan

*** Represents investment purchased with cash collateral received for securities
on loan.

ADR  American Depositary Receipt





                                      -26-