-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LhzMpT4aqQ0CCd9Hqr+TCiWAbifBHa1TNg7+FMeNwSSLyypcO9+sxNOQ6Ly8xLfJ QQvslaj09jGm1hbtVY+13g== 0000909012-02-000202.txt : 20020415 0000909012-02-000202.hdr.sgml : 20020415 ACCESSION NUMBER: 0000909012-02-000202 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020306 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROGRESSIVE RETURN FUND INC CENTRAL INDEX KEY: 0000854580 IRS NUMBER: 510323965 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05891 FILM NUMBER: 02568343 BUSINESS ADDRESS: STREET 1: C/O BEAR STEARNS FUNDS MANAGEMENT INC STREET 2: 383 MADISON AVENUE - 23RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10179 BUSINESS PHONE: 2122722093 MAIL ADDRESS: STREET 1: C/O BEAR STEARNS FUNDS MANAGEMENT INC STREET 2: 383 MADISON AVENUE - 23RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10179 FORMER COMPANY: FORMER CONFORMED NAME: PORTUGAL FUND INC DATE OF NAME CHANGE: 19920703 N-30D 1 t23846.txt ANNUAL REPORT 12/31/01 ================================================================================ PROGRESSIVE RETURN FUND, INC. ANNUAL REPORT DECEMBER 31, 2001 ================================================================================ - -------------------------------------------------------------------------------- CONTENTS - -------------------------------------------------------------------------------- Letter to Shareholders .................................................... 1 Portfolio Summary ......................................................... 4 Schedule of Investments ................................................... 5 Statement of Assets and Liabilities ....................................... 12 Statement of Operations ................................................... 13 Statement of Changes in Net Assets ........................................ 14 Financial Highlights ...................................................... 15 Notes to Financial Statements ............................................. 16 Report of Independent Accountants ......................................... 20 Description of Dividend Reinvestment & Cash Purchase Plan ................. 21 Additional Information Regarding the Fund's Directors and Officers ........ 22 Summary of General Information ............................................ 24 Shareholder Information ................................................... 24 Privacy Policy Notice ..................................................... 25 ================================================================================ - -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS - -------------------------------------------------------------------------------- January 31, 2002 Dear Fellow Shareholder: Our annual report for Progressive Return Fund, Inc. (the "Fund") covering the year ended December 31, 2001 follows. At the end of the year, the Fund's net assets were $41.8 million and the Net Asset Value ("NAV") per share was $9.90. The discount from NAV at which the Fund's shares traded improved markedly to 9.60% at the end of the year from 23.20% at the beginning of the year. Investment focus changed to a much broader diversification in U.S. and non-U.S. equities. Early in the year, officers of the Fund managed the portfolio internally. Shareholders confirmed the choice of Cornerstone Advisors, Inc. as investment manager at the Fund's annual meeting in April 2001. ECONOMIC AND MARKET SUMMARY Investors in 2001 faced a very difficult year as the market continued the decline that started in 2000. As the economy stalled into recession in March and earnings disappointments flooded the news, even aggressive support by the Federal Reserve in lowering short-term interest rates had limited effect. The tragic events of September 11th finally pushed markets into a tumultuous, but brief, free-fall. The negative momentum accelerated in the third quarter with the S&P 500 Index posting a decline of 14.9%, its biggest quarterly drop since the crash of 1987, and leaving this U.S. equity index down 21.2% for the first nine months of 2001. The sorry state of the economy was confirmed by a 1.3% quarterly decline in the U.S. Gross Domestic Product (GDP), the broadest gauge of economic health. Even an encouraging rebound in the fourth quarter still left the index down 13.0% for all of 2001. Most sectors returned double-digit losses with telecommunications, information technology, and utilities hit particularly hard. With recession dampening exports, and currencies weakening against the dollar, most international markets fared even worse. The Morgan Stanley Capital International Europe Australasia Far East Index, representing developed global markets, tumbled 22.6% for the year. However, as economic data comes in for the fourth quarter, the outlook for economic recovery looks increasingly positive. The GDP increased 0.2% in this final quarter of 2001, defying economists' previous expectations for a decline of 1.0%. Nevertheless, this still left GDP up only 1.1% for the year, a weak performance not seen since the 0.5% decline in 1991, in the midst of the last recession. Fourth quarter economic activity was aided by rising government spending, as the war on terrorism continued, as well as by continuing strong consumer spending on items such as automobiles. Government spending grew 9.2%, the biggest rise in fifteen years. Total consumer spending jumped 5.4%, with durable goods purchases rising a sizzling 38.4%, the largest increase since 1986. As a result, companies saw their inventories drop by an amazing $120.6 billion in the quarter, the largest decline ever recorded. Unlike households, businesses continued to keep a tight rein on spending. Plant and equipment expenditures dove 12.8% in the fourth quarter, which followed a drop of 8.5% in the third quarter. ================================================================================ 1 - -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- PORTFOLIO PERFORMANCE In this challenging climate, the Fund posted a -11.62% total return on NAV for the year. By comparison, the S&P 500 Index fell 13.0% during the same period. Moving the portfolio from the beginning of the year focus in international equities to more broadly diversified U.S. equities proved to be beneficial. This reduction in international exposure allowed the Fund to avoid much of the adverse currency impact from the strong dollar and to concentrate on domestic equities. In spite of the generally disappointing performance in information technology, several of our largest positions in this sector proved to be strong performers and finished the year with solid gains. As in the first half of the year, the Fund benefited from the positive performance of several investments in financial services. Investments in consumer sectors, including retail and healthcare products, also produced positive returns for both the second half and for the full year. OUTLOOK The Federal Reserve was impressed enough by positive signs in the economy that it brought an end to the year-long campaign of interest rate cuts. At their just completed meeting on January 30, 2002, policymakers left their benchmark rate unchanged at 1.75%, a 40-year low. The Fed did, however, reiterate its long-standing warning that economic weakness, not possible future inflation, remains the main concern for the U.S. economy. Going forward, we believe there is increasing evidence that the economy may have bottomed out and will begin to recover in the first half of 2002. Last quarter's unprecedented depletion of business inventories bodes well for a rebound. Companies will need to ramp up production significantly to replace these depleted goods, helping to fuel GDP growth for future quarters. Unemployment is likely to edge up slightly in the first quarter of 2002, possibly to 5.9%, the highest level in almost seven years, even as the rate of job losses slows and the economic outlook continues to brighten. This expected bottoming out of job losses should be a firm signal that the recession has ended and economic recovery is firmly at hand. We see that the stock market record of the past few years supports time-tested principles of equity investing and are confident that our strategies, which are consistent and conservative, will prove their worth. We continue to maintain that our approach involving a long-term perspective, with an emphasis on broad diversification, balanced asset allocation and liquidity, and our current U.S. equity focus, are appropriate for the shareholders of our Fund. The Board continues to emphasize using the Fund's unique advantages to enhance long-term capital appreciation. Under the Board's leadership: - The investment manager was able to use the investment flexibility given by the stockholders to broadly diversify the Fund's holdings. - The program of repurchasing the Fund's shares has continued. Through December 31, 2001, a total of 1,126,900 shares had been bought by the Fund, representing 21.04% of the shares outstanding at the start of the program. In effect, this repurchasing of shares at a discount allows the Fund to purchase its portfolio at below market prices. It has provided a direct benefit to those remaining as shareholders by increasing the Fund's NAV. It has also provided additional liquidity for those shareholders desiring to sell their Fund shares. ================================================================================ 2 - -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS (CONCLUDED) - -------------------------------------------------------------------------------- - The level of expenses has been substantially reduced. Even with the lower level of assets, the expense ratio has dropped. An emphasis on cost control, changes in service providers, and fee waivers by the investment manager all helped to keep costs lower than in the past. - The Fund made a distribution in excess of net investment income of $1.00 per share which was declared on December 14, 2001 with an ex-date of December 29, 2001. Tax treatment of such distribution will be determined at the end of the Fund's December 31, 2002 fiscal year upon which time the Fund will furnish tax documentation, as necessary. The Fund's dividend reinvestment plan gives shareholders the choice between receiving their distributions in cash or reinvesting in shares issued from the Fund's treasury share balance. We believe that our highly diversified portfolio will enable Progressive Return Fund, Inc. to produce excellent returns for the long-term investor. We know you have a choice, we thank you for your support, and we look forward to continuing to serve you in the future. Sincerely, /s/ RALPH W. BRADSHAW - --------------------- Ralph W. Bradshaw Chairman ================================================================================ 3 - -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. PORTFOLIO SUMMARY - AS OF DECEMBER 31, 2001 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN, BY SECTOR Percent of Sector Net Assets - -------------------------------------------------------------------------------- 1. Drugs (Major Pharmaceuticals) 11.5 - -------------------------------------------------------------------------------- 2. Manufacturing (Diversified) 7.5 - -------------------------------------------------------------------------------- 3. Computers (Software & Services) 7.3 - -------------------------------------------------------------------------------- 4. Computers (Hardware) 5.8 - -------------------------------------------------------------------------------- 5. Insurance (Property-Casualty) 4.9 - -------------------------------------------------------------------------------- 6. Banks (Money Center) 4.2 - -------------------------------------------------------------------------------- 7. Oil (International Integrated) 3.9 - -------------------------------------------------------------------------------- 8. Telephone 3.6 - -------------------------------------------------------------------------------- 9. Retail (Discounters) 3.4 - -------------------------------------------------------------------------------- 10. Electronics (Semiconductors) 3.4 - -------------------------------------------------------------------------------- TOP TEN HOLDINGS, BY ISSUER Percent of Holding Sector Net Assets - -------------------------------------------------------------------------------- 1. Microsoft Corp. Computers (Software & Services) 5.4 - -------------------------------------------------------------------------------- 2. General Electric Co. Manufacturing (Diversified) 4.3 - -------------------------------------------------------------------------------- 3. International Business Machines Corp. Computers (Hardware) 4.2 - -------------------------------------------------------------------------------- 4. Pfizer Inc. Drugs (Major Pharmaceuticals) 2.8 - -------------------------------------------------------------------------------- 5. Citigroup Inc. Insurance (Property-Casualty) 2.8 - -------------------------------------------------------------------------------- 6. Wal-Mart Stores, Inc. Retail (Discounters) 2.8 - -------------------------------------------------------------------------------- 7. Intel Corp. Electronics (Semiconductors) 2.3 - -------------------------------------------------------------------------------- 8. Royal Dutch Petroleum Co. Oil (International Integrated) 2.2 - -------------------------------------------------------------------------------- 9. John Hancock Bank & Thrift Opportunity Fund Closed-End Domestic Funds 2.0 - -------------------------------------------------------------------------------- 10. Johnson & Johnson Drugs (Major Pharmaceuticals) 2.0 - -------------------------------------------------------------------------------- ================================================================================ 4
- -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. SCHEDULE OF INVESTMENTS - DECEMBER 31, 2001 - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- EQUITY SECURITIES - 108.88% BERMUDA - 1.25% CAPITAL GOODS - 1.25% MANUFACTURING (DIVERSIFIED) - 1.25% Tyco International Ltd. ......................... (cost - $478,612) ............................. 8,897 $ 524,033 ---------- CANADA - 0.27% BASIC MATERIALS - 0.27% ALUMINUM - 0.13% Alcan Inc. ...................................... 1,500 53,895 ---------- GOLD & PRECIOUS METALS - 0.14% Barrick Gold Corp. .............................. 2,589 41,295 Placer Dome Inc. ................................ 1,500 16,365 ---------- 57,660 ---------- Total Basic Materials ........................... 111,555 ---------- Total Canada (cost - $102,219) .................. 111,555 ---------- FRANCE - 0.71% COMMUNICATION SERVICES - 0.71% TELECOMMUNICATIONS (CELLULAR) - 0.71% Alcatel SA, ADR (cost - $305,685) ............................. 18,000 297,900 ---------- GERMANY - 0.56% CAPITAL GOODS - 0.56% MANUFACTURING (DIVERSIFIED) - 0.56% Siemens AG, ADR (cost - $285,275) ............................. 3,600 235,728 ---------- NETHERLANDS - 3.21% CONSUMER STAPLES - 0.62% FOODS - 0.62% Unilever NV, NY Shares .......................... 4,500 259,245 ---------- ENERGY - 2.59% OIL (INTERNATIONAL INTEGRATED) - 2.25% Royal Dutch Petroleum Co., NY Shares ............ 19,200 941,184 ---------- OIL & GAS (EXPLORATION & PRODUCTION) - 0.34% Schlumberger Ltd. ............................... 2,600 142,870 ---------- Total Energy .................................... 1,084,054 ---------- Total Netherlands (cost - $1,532,738) ........................... 1,343,299 ---------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- PANAMA - 0.18% CONSUMER STAPLES - 0.18% ENTERTAINMENT - 0.18% Carnival Corp. (cost - $80,421) ................. 2,700 $ 75,816 ---------- UNITED STATES - 102.70% BASIC MATERIALS - 2.35% ALUMINUM - 0.35% Alcoa Inc. ...................................... 4,200 149,310 ---------- CHEMICALS (DIVERSIFIED) - 1.27% Air Products & Chemicals, Inc. .................. 1,100 51,601 Dow Chemical Co. (The) .......................... 4,100 138,498 E.I. Du Pont de Nemours & Co. ................... 7,200 306,072 Rohm & Hass Co. ................................. 1,000 34,630 ---------- 530,801 ---------- PAPER & FOREST PRODUCTS - 0.73% International Paper Co. ......................... 2,500 100,875 Kimberly-Clark Corp. ............................ 2,500 149,500 Weyerhaeuser Co. ................................ 1,000 54,080 ---------- 304,455 ---------- Total Basic Materials ........................... 984,566 ---------- CAPITAL GOODS - 7.92% AEROSPACE/DEFENSE - 0.90% General Dynamics Corp. .......................... 2,600 207,064 Lockheed Martin Corp. ........................... 2,500 116,675 Raytheon Co. .................................... 1,600 51,952 ---------- 375,691 ---------- ELECTRICAL EQUIPMENT - 0.46% Motorola, Inc. .................................. 10,000 150,200 Solectron Corp.+ ................................ 3,700 41,736 ---------- 191,936 ---------- MACHINERY (DIVERSIFIED) - 0.54% Caterpillar Inc. ................................ 1,600 83,600 Deere & Co. ..................................... 1,100 48,026 Illinois Tool Works Inc. ........................ 1,400 94,808 ---------- 226,434 ---------- ================================================================================ See accompanying notes to financial statements. 5 - -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. SCHEDULE OF INVESTMENTS - DECEMBER 31, 2001 (CONTINUED) - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- MANUFACTURING (DIVERSIFIED) - 5.71% General Electric Co. ............................ 45,400 $1,819,632 Honeywell International Inc. .................... 3,600 121,752 Masco Corp. ..................................... 2,500 61,250 Minnesota Mining & Manufacturing Co. (3M) ....... 1,900 224,599 United Technologies Corp. ....................... 2,500 161,575 ---------- 2,388,808 ---------- OFFICE EQUIPMENT & SUPPLIES - 0.10% Imagistics International Inc.+ .................. 88 1,087 Pitney Bowes Inc. ............................... 1,100 41,371 ---------- 42,458 ---------- WASTE MANAGEMENT - 0.21% Waste Management, Inc. .......................... 2,800 89,348 ---------- Total Capital Goods ............................. 3,314,675 ---------- CLOSED-END FUNDS - 2.03% CLOSED-END DOMESTIC FUNDS - 2.03% John Hancock Bank & Thrift Opportunity Fund ..... 103,000 850,780 ---------- COMMUNICATION SERVICES - 6.05% TELECOMMUNICATIONS (CELLULAR) - 0.66% ALLTEL Corp. .................................... 1,500 92,595 AT&T Wireless Services Inc.+ .................... 5,534 79,524 Sprint Corp. (PCS Group)+ ....................... 4,300 104,963 ---------- 277,082 ---------- TELECOMMUNICATIONS (LONG DISTANCE) - 1.76% AT&T Corp. ...................................... 21,200 384,568 Sprint Corp. .................................... 4,000 80,320 WorldCom, Inc. (WorldCom Group)+ ................ 19,200 270,336 ---------- 735,224 ---------- TELEPHONE - 3.63% BellSouth Corp. ................................. 8,500 324,275 SBC Communications Inc. ......................... 15,500 607,135 Verizon Communications Inc. ..................... 12,400 588,504 ---------- 1,519,914 ---------- Total Communication Services .................... 2,532,220 ---------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- CONSUMER CYCLICALS - 10.23% AUTO PARTS & Equipment - 0.28% Delphi Automotive Systems Corp. ................. 2,600 $ 35,516 Johnson Controls, Inc. .......................... 1,000 80,750 ---------- 116,266 ---------- AUTOMOBILES - 0.81% Ford Motor Co. .................................. 8,600 135,192 General Motors Corp. ............................ 2,600 126,360 Harley-Davidson, Inc. ........................... 1,400 76,034 ---------- 337,586 ---------- BUILDING MATERIALS - 0.07% Georgia-Pacific Corp. ........................... 1,000 27,610 ---------- CONSUMER (JEWELRY, NOVELTIES) - 0.10% Mattel, Inc. .................................... 2,500 43,000 ---------- HOUSEHOLD FURNISHINGS & APPAREL - 0.19% Bed Bath & Beyond Inc.+ ......................... 1,300 44,070 Newell Rubbermaid Inc. .......................... 1,300 35,841 ---------- 79,911 ---------- LODGING & HOTELS - 0.15% Hilton Hotels Corp. ............................. 1,700 18,564 Marriott International, Inc., Class A ........... 1,100 44,715 ---------- 63,279 ---------- PUBLISHING (NEWSPAPERS) - 0.32% Gannett Co., Inc. ............................... 1,200 80,676 Tribune Co. ..................................... 1,400 52,402 ---------- 133,078 ---------- RETAIL (BUILDING SUPPLIES) - 0.80% Lowe's Companies, Inc. .......................... 7,200 334,152 ---------- RETAIL (COMPUTERS & ELECTRONICS) - 0.51% Best Buy Co., Inc. .............................. 2,500 186,200 Circuit City Stores-Circuit City Group .......... 1,000 25,950 ---------- 212,150 ---------- ================================================================================ See accompanying notes to financial statements. 6 - -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. SCHEDULE OF INVESTMENTS - DECEMBER 31, 2001 (CONTINUED) - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- RETAIL (DEPARTMENT STORES) - 0.81% Federated Department Stores, Inc.+ .............. 1,000 $ 40,900 J.C. Penney Co., Inc. ........................... 1,300 34,970 Kohl's Corp.+ ................................... 3,000 211,320 May Department Stores Co. (The) ................. 1,400 51,772 ---------- 338,962 ---------- RETAIL (DISCOUNTERS) - 3.36% Dollar General Corp. ............................ 1,500 22,350 Kmart Corp.+ .................................... 2,500 13,650 Target Corp. .................................... 4,100 168,305 TJX Companies, Inc. (The) ....................... 1,300 51,818 Wal-Mart Stores, Inc. ........................... 20,000 1,151,000 ---------- 1,407,123 ---------- RETAIL (GENERAL MERCHANDISE) - 0.18% Sears, Roebuck & Co. ............................ 1,600 76,224 ---------- RETAIL (HOME SHOPPING) - 1.26% Home Depot, Inc. (The) .......................... 10,300 525,403 ---------- RETAIL (SPECIALTY) - 0.22% Office Depot, Inc.+ ............................. 1,400 25,956 Staples, Inc.+ .................................. 2,500 46,750 Toys "R" Us, Inc.+ .............................. 1,000 20,740 ---------- 93,446 ---------- SERVICES (ADVERTISING/MARKETING) - 0.34% Omnicom Group Inc. .............................. 1,600 142,960 ---------- SERVICES (COMMERCIAL & CONSUMER) - 0.66% Cendant Corp.+ .................................. 3,300 64,713 Concord EFS, Inc. ............................... 2,500 81,950 H&R Block, Inc. ................................. 1,000 44,700 IMS Health Inc. ................................. 1,400 27,314 Paychex, Inc. ................................... 1,700 59,568 ---------- 278,245 ---------- TEXTILES (APPAREL) - 0.17% Nike, Inc., Class B ............................. 1,300 73,112 ---------- Total Consumer Cyclicals ........................ 4,282,507 ---------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- CONSUMER STAPLES - 12.66% BEVERAGES (ALCOHOLIC) - 0.44% Anheuser-Busch Companies, Inc. ................................. 4,100 $ 185,361 ---------- BEVERAGES (NON-ALCOHOLIC) - 2.15% Coca-Cola Co. (The) ............................. 11,300 532,795 Coca-Cola Enterprises Inc. ...................... 2,500 47,350 PepsiCo, Inc. ................................... 6,600 321,354 ---------- 901,499 ---------- BROADCASTING (TV, CABLE, RADIO) - 2.20% AOL Time Warner Inc.+ ........................... 19,850 637,185 Clear Channel Communications, Inc.+ ............. 2,700 137,457 Comcast Corp., Special Class A+ ................. 4,100 147,600 ---------- 922,242 ---------- DISTRIBUTORS (FOOD & HEALTH) - 0.27% Costco Wholesale Corp.+ ......................... 2,500 110,950 ---------- ENTERTAINMENT - 1.45% Viacom Inc., non-voting Class B+ ................ 6,900 304,635 Walt Disney Co. (The) ........................... 14,500 300,440 ---------- 605,075 ---------- FOODS - 1.38% Archer-Daniels-Midland Co. ...................... 3,045 43,696 Campbell Soup Co. ............................... 2,000 59,740 ConAgra Foods, Inc. ............................. 2,500 59,425 General Mills, Inc. ............................. 1,300 67,613 H.J. Heinz Co. .................................. 1,600 65,792 Kellogg Co. ..................................... 1,900 57,190 Sara Lee Corp. .................................. 3,800 84,474 SYSCO Corp. ..................................... 3,100 81,282 Wrigley (William) Jr. Co. ....................... 1,100 56,507 ---------- 575,719 ---------- HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.10% Clorox Co. (The) ................................ 1,100 43,505 ---------- ================================================================================ See accompanying notes to financial statements. 7 - -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. SCHEDULE OF INVESTMENTS - DECEMBER 31, 2001 (CONTINUED) - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- PERSONAL CARE - 2.06% Avon Products, Inc. ............................. 1,200 $ 55,800 Colgate-Palmolive Co. ........................... 2,600 150,150 Gillette Co. (The) .............................. 5,500 183,700 Procter & Gamble Co. (The) ...................... 6,000 474,780 ---------- 864,430 ---------- RESTAURANTS - 0.49% McDonald's Corp. ................................ 6,500 172,055 Starbucks Corp.+ ................................ 1,700 32,385 ---------- 204,440 ---------- RETAIL (DRUG STORES) - 0.37% Walgreen Co. .................................... 4,600 154,836 ---------- RETAIL (FOOD CHAINS) - 0.63% Albertson's, Inc. ............................... 2,500 78,725 Kroger Co. (The)+ ............................... 3,800 79,306 Safeway Inc.+ ................................... 2,500 104,375 ---------- 262,406 ---------- TOBACCO - 1.12% Philip Morris Companies Inc. .................... 10,200 467,670 ---------- Total Consumer Staples .......................... 5,298,133 ---------- ENERGY - 4.63% OIL (DOMESTIC INTEGRATED) - 1.86% Exxon Mobil Corp. ............................... 19,800 778,140 ---------- OIL (INTERNATIONAL INTEGRATED) - 1.67% ChevronTexaco Corp. ............................. 6,925 620,549 Conoco Inc. ..................................... 2,800 79,240 ---------- 699,789 ---------- OIL & GAS (DRILLING & EXPLORATION) - 0.36% Baker Hughes Inc. ............................... 4,100 149,527 ---------- OIL & GAS (EXPLORATION & PRODUCTION) - 0.25% Anadarko Petroleum Corp. ........................ 1,200 68,220 Burlington Resources Inc. ....................... 1,000 37,540 ---------- 105,760 ---------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- OIL & GAS (REFINING & MINING) - 0.49% Occidental Petroleum Corp. ...................... 1,700 $ 45,101 Phillips Petroleum Co. .......................... 1,200 72,312 Unocal Corp. .................................... 1,200 43,284 USX-Marathon Group .............................. 1,500 45,000 ---------- 205,697 ---------- Total Energy .................................... 1,938,913 ---------- FINANCIAL - 17.61% BANKS (MAJOR REGIONAL) - 2.58% AmSouth Bancorp ................................. 1,800 34,020 Bank One Corp. .................................. 5,300 206,965 BB&T Corp. ...................................... 1,900 68,609 Fifth Third Bancorp ............................. 2,500 153,950 Huntington Bancshares Inc. ...................... 1,200 20,628 Mellon Financial Corp. .......................... 2,500 94,050 National City Corp. ............................. 2,800 81,872 Northern Trust Corp. ............................ 1,000 60,220 PNC Financial Services Group .................... 1,400 78,680 Regions Financial Corp. ......................... 1,000 30,040 SouthTrust Corp. ................................ 1,500 37,005 Synovus Financial Corp. ......................... 1,300 32,565 U.S. Bancorp .................................... 8,701 182,112 ---------- 1,080,716 ---------- BANKS (MONEY CENTER) - 4.22% Bank of America Corp. ........................... 7,400 465,830 Bank of New York Co., Inc. (The) ................ 3,400 138,720 FleetBoston Financial Corp. ..................... 4,100 149,650 J.P. Morgan Chase & Co. ......................... 8,700 316,245 KeyCorp ......................................... 2,000 48,680 SunTrust Banks, Inc. ............................ 1,400 87,780 Wachovia Corp. .................................. 6,500 203,840 Wells Fargo & Co. ............................... 8,100 351,945 ---------- 1,762,690 ---------- CONSUMER FINANCE - 1.19% American Express Co. ............................ 6,100 217,709 Household International, Inc. ................... 2,500 144,850 MBNA Corp. ...................................... 3,900 137,280 ---------- 499,839 ---------- ================================================================================ See accompanying notes to financial statements. 8 - -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. SCHEDULE OF INVESTMENTS - DECEMBER 31, 2001 (CONTINUED) - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- DIVERSIFIED - 1.91% Fannie Mae ...................................... 4,000 $ 318,000 Freddie Mac ..................................... 3,100 202,740 Morgan Stanley Dean Witter & Co. ................ 5,000 279,700 ---------- 800,440 ---------- INSURANCE (BROKERS) - 0.95% Hartford Financial Services Group, Inc. (The) ... 4,100 257,603 Marsh & McLennan Companies, Inc. ................ 1,300 139,685 ---------- 397,288 ---------- INSURANCE (LIFE & HEALTH) - 0.59% AFLAC Inc. ...................................... 2,600 63,856 Aon Corp. ....................................... 1,200 42,624 MetLife, Inc. ................................... 3,500 110,880 UnumProvident Corp. ............................. 1,100 29,161 ---------- 246,521 ---------- INSURANCE (PROPERTY-CASUALTY) - 4.85% Allstate Corp. (The) ............................ 3,300 111,210 American International Group, Inc. .............. 8,989 713,727 Citigroup Inc. .................................. 23,000 1,161,040 St. Paul Companies, Inc. (The) .................. 1,000 43,970 ---------- 2,029,947 ---------- INVESTMENT BANKING & BROKERAGE - 0.86% Charles Schwab Corp. (The) ...................... 6,000 92,820 Lehman Brothers Holdings Inc. ................... 1,100 73,480 Merrill Lynch & Co., Inc. ....................... 3,700 192,844 ---------- 359,144 ---------- INVESTMENT MANAGEMENT - 0.10% Franklin Resources, Inc. ........................ 1,200 42,324 ---------- SAVINGS & LOANS - 0.36% Charter One Financial, Inc. ..................... 1,050 28,506 Washington Mutual, Inc. ......................... 3,750 122,625 ---------- 151,131 ---------- Total Financial ................................. 7,370,040 ---------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- HEALTHCARE - 14.95% BIOTECHNOLOGY - 0.75% Amgen Inc.+ ..................................... 4,700 $ 265,268 MedImmune, Inc.+ ................................ 1,000 46,350 ---------- 311,618 ---------- DRUGS (GENERIC) - 0.42% Cardinal Health, Inc. ........................... 1,950 126,087 McKesson Corp. .................................. 1,300 48,620 ---------- 174,707 ---------- DRUGS (MAJOR PHARMACEUTICALS) - 11.52% Abbott Laboratories ............................. 7,100 395,825 Allergan, Inc. .................................. 1,000 75,050 American Home Products Corp. .................... 6,000 368,160 Bristol-Myers Squibb Co. ........................ 8,900 453,900 Eli Lilly & Co. ................................. 5,300 416,262 Johnson & Johnson ............................... 13,878 820,190 Merck & Co., Inc. ............................... 10,500 617,400 Pfizer Inc. ..................................... 29,700 1,183,545 Pharmacia Corp. ................................. 5,900 251,635 Schering-Plough Corp. ........................... 6,700 239,927 ---------- 4,821,894 ---------- HOSPITAL MANAGEMENT - 0.44% HCA Inc. ........................................ 2,500 96,350 Tenet Healthcare Corp.+ ......................... 1,500 88,080 ---------- 184,430 ---------- MANAGED CARE - 0.26% UnitedHealth Group Inc. ......................... 1,500 106,155 ---------- MEDICAL PRODUCTS - 1.50% Baxter International Inc. ....................... 2,800 150,164 Becton, Dickinson & Co. ......................... 1,200 39,780 Boston Scientific Corp.+ ........................ 2,500 60,300 Guidant Corp.+ .................................. 1,400 69,720 Medtronic, Inc. ................................. 5,500 281,655 Zimmer Holdings, Inc.+ .......................... 890 27,181 ---------- 628,800 ---------- SPECIALIZED SERVICES - 0.06% Healthsouth Corp.+ .............................. 1,800 26,676 ---------- Total Healthcare ................................ 6,254,280 ---------- ================================================================================ See accompanying notes to financial statements. 9 - -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. SCHEDULE OF INVESTMENTS - DECEMBER 31, 2001 (CONTINUED) - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- TECHNOLOGY - 20.34% Communication Equipment - 0.66% Lucent Technologies Inc. ........................ 11,600 $ 72,964 QUALCOMM Inc.+ .................................. 4,000 202,000 ---------- 274,964 ---------- COMPUTERS (HARDWARE) - 5.78% Apple Computer, Inc.+ ........................... 1,500 32,850 Dell Computer Corp.+ ............................ 11,800 320,724 Hewlett-Packard Co. ............................. 9,100 186,914 International Business Machines Corp. ........... 14,500 1,753,920 Sun Microsystems, Inc.+ ......................... 10,000 123,400 ---------- 2,417,808 ---------- COMPUTERS (NETWORKING) - 1.30% Cisco Systems, Inc.+ ............................ 30,000 543,300 ---------- COMPUTERS (SOFTWARE & SERVICES) - 7.25% Adobe Systems Inc. .............................. 1,100 34,155 BMC Software, Inc.+ ............................. 1,100 18,007 Computer Associates International, Inc. ......... 2,700 93,123 Compuware Corp.+ ................................ 1,700 20,043 First Data Corp. ................................ 1,900 149,055 Intuit Inc.+ .................................... 2,000 85,520 Microsoft Corp.+ ................................ 33,800 2,239,926 Oracle Corp.+ ................................... 25,200 348,012 Yahoo! Inc.+ .................................... 2,500 44,350 ---------- 3,032,191 ---------- ELECTRONICS (COMPONENT DISTRIBUTION) - 0.41% Emerson Electric Co. ............................ 2,000 114,200 Sanmina-SCI Corp.+ .............................. 3,000 59,700 ---------- 173,900 ---------- ELECTRONICS (SEMICONDUCTORS) - 3.36% Altera Corp.+ ................................... 1,900 40,318 Analog Devices, Inc.+ ........................... 1,700 75,463 Conexant Systems, Inc.+ ......................... 1,100 15,796 Intel Corp. ..................................... 30,200 949,790 LSI Logic Corp.+ ................................ 1,500 23,670 Micron Technology, Inc.+ ........................ 2,600 80,600 Texas Instruments Inc. .......................... 7,900 221,200 ---------- 1,406,837 ---------- Description Shares (Note A) - -------------------------------------------------------------------------------- EQUIPMENT (SEMICONDUCTORS) - 0.66% Applied Materials, Inc.+ ........................ 3,700 $ 148,370 Linear Technology Corp. ......................... 1,500 58,560 Maxim Integrated Products, Inc.+ ................ 1,300 68,263 ---------- 275,193 ---------- PHOTOGRAPHY/IMAGING - 0.10% Eastman Kodak Co. ............................... 1,400 41,202 ---------- SERVICES (DATA PROCESSING) - 0.82% Automatic Data Processing, Inc. ................. 2,900 170,810 Electronic Data Systems Corp. ................... 2,500 171,375 342,185 ---------- Total Technology ................................ 8,507,580 ---------- TRANSPORTATION - 0.77% AIR FREIGHT - 0.16% FedEx Corp.+ .................................... 1,300 67,444 ---------- AIRLINES - 0.17% Southwest Airlines Co. .......................... 3,750 69,300 ---------- RAILROADS - 0.44% Burlington Northern Santa Fe Corp. .................................. 1,900 54,207 CSX Corp. ....................................... 1,000 35,050 Norfolk Southern Corp. .......................... 1,800 32,994 Union Pacific Corp. ............................. 1,100 62,700 ---------- 184,951 ---------- Total Transportation ............................ 321,695 ---------- ================================================================================ See accompanying notes to financial statements. 10 - -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. SCHEDULE OF INVESTMENTS - DECEMBER 31, 2001 (CONTINUED) - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- UTILITIES - 3.16% ELECTRIC COMPANIES - 2.42% American Electric Power Co., Inc. ............... 1,500 $ 65,295 Consolidated Edison, Inc. ....................... 1,000 40,360 Dominion Resources, Inc. ........................ 1,100 66,110 Duke Energy Corp. ............................... 9,000 353,340 Edison International+ ........................... 1,500 22,650 Entergy Corp. ................................... 1,100 43,021 Exelon Corp. .................................... 1,500 71,820 FirstEnergy Corp. ............................... 1,100 38,478 NiSource Inc. ................................... 1,000 23,060 Progress Energy, Inc. ........................... 1,000 45,030 Reliant Energy, Inc. ............................ 1,400 37,128 Sempra Energy ................................... 1,000 24,550 Southern Co. (The) .............................. 3,100 78,585 TXU Corp. ....................................... 1,200 56,580 Xcel Energy, Inc. ............................... 1,600 44,384 ---------- 1,010,391 ---------- NATURAL GAS - 0.69% Dynegy Inc., Class A ............................ 1,500 38,250 El Paso Corp. ................................... 2,500 111,525 PG&E Corp.+ ..................................... 1,800 34,632 Public Service Enterprises Group Inc. ........... 1,000 42,190 Williams Companies, Inc. (The) .................. 2,500 63,800 ---------- 290,397 ---------- POWER PRODUCTS (INDEPENDENT) - 0.05% Mirant Corp+ .................................... 1,232 19,736 ---------- Total Utilities ................................. 1,320,524 ---------- Total United States (cost - $44,698,690) .......................... 42,975,913 ---------- Total Equity Securities (cost - $47,483,640) .......................... 45,564,244 =========== Principal Amount Value Description (000's) (Note A) - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT - 1.45% REPURCHASE AGREEMENT - 1.45% Bear, Stearns & Co. Inc. (Agreement dated 12/31/01 to be repurchased at $606,080), 1.65%, 01/02/02 (cost - $606,024) (Note F) ........................................ $606 $ 606,024 ---------- TOTAL INVESTMENTS - 110.33% (cost - $48,089,664) (Notes A, C) ....................................... 46,170,268 ---------- LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS - (10.33)% .......................... (4,322,826) NET ASSETS - 100.00% ................................. $41,847,442 =========== - ---------- + Security is non-income producing. ADR American Depositary Receipts.
================================================================================ See accompanying notes to financial statements. 11
- -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2001 - -------------------------------------------------------------------------------- ASSETS Investments, at value (Cost $48,089,664) (Note A) ..................... $ 46,170,268 Cash collateral received for securities loaned (Note E) ............... 755,986 Receivables: Dividends ..................................................... 44,217 Interest ...................................................... 778 Prepaid expenses ...................................................... 1,211 ------------ Total Assets .......................................................... 46,972,460 ------------ LIABILITIES Payables: Distribution to shareholders (Note A) ......................... 4,228,516 Upon return of securities loaned (Note E) ..................... 755,986 Investment management fees (Note B) ........................... 48,601 Other accrued expenses ........................................ 91,915 ------------ Total Liabilities ..................................................... 5,125,018 ------------ NET ASSETS (applicable to 4,228,516 shares of common stock outstanding) $ 41,847,442 ============ NET ASSET VALUE PER SHARE ($41,847,442 / 4,228,516) ................... $ 9.90 ============ NET ASSETS CONSISTS OF Capital stock, $0.001 par value; 4,228,516 shares outstanding (100,000,000 shares authorized) ............................... $ 4,229 Paid-in capital ....................................................... 62,101,955 Cost of 203,900 shares repurchased .................................... (1,947,040) Distributions in excess of net investment income ...................... (4,221,130) Accumulated net realized loss on investments and foreign currency related transactions ......................... (12,171,176) Net unrealized depreciation in value of investments ................... (1,919,396) ------------ Net assets applicable to shares outstanding ........................... $ 41,847,442 ============
================================================================================ See accompanying notes to financial statements. 12
- -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2001 - -------------------------------------------------------------------------------- INVESTMENT INCOME Income (Note A): Dividends ............................................ $ 642,453 Interest ............................................. 132,919 Less: Foreign taxes withheld ......................... (3,483) ----------- Total Investment Income .............................. 771,889 ----------- Expenses: Investment management fees (Note B) .................. 331,733 Audit and legal fees (Note B) ........................ 122,560 Directors' fees ...................................... 86,809 Administration fees .................................. 58,976 Printing ............................................. 54,029 Accounting fees ...................................... 43,425 Custodian fees ....................................... 30,124 Transfer agent fees .................................. 25,015 NYSE listing fees .................................... 23,873 Insurance ............................................ 15,558 Other ................................................ 17,061 ----------- Total Expenses ....................................... 809,163 Less: Fees paid indirectly (Note B) .................. (42,694) Less: Management fee waivers (Note B) ................ (1,966) ----------- Net Expenses ................................. 764,503 ----------- Net Investment Income ................................ 7,386 ----------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS Net realized gain/(loss) from: Investments .......................................... (4,384,962) Foreign currency related transactions ................ 234 Net change in unrealized appreciation in value of investments and translation of other assets and liabilities denominated in foreign currency .......................................... (2,439,912) ----------- Net realized and unrealized loss on investments and foreign currency related transactions ................. (6,824,640) ----------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ......... $(6,817,254) ===========
================================================================================ See accompanying notes to financial statements. 13
- -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- For the Years Ended December 31, 2001 2000 ---------------------------- DECREASE IN NET ASSETS Operations: Net investment income/(loss) .................... $ 7,386 $ (38,625) Net realized loss on investments and foreign currency related transactions ......... (4,384,728) (7,140,430) Reimbursement from adviser ...................... -- 86,640 Net change in unrealized appreciation in value of investments and translation of other assets and liabilities denominated in foreign currency ........................... (2,439,912) (7,125,666) ------------ ------------ Net decrease in net assets resulting from operations ..................... (6,817,254) (14,218,081) ------------ ------------ Dividends and distributions to shareholders (Note A): Net investment income ........................... -- (3,607) Net realized gain on investments and foreign currency related transactions ......... -- (1,168,685) In excess of net investment income .............. (4,228,516) -- ------------ ------------ Total dividends and distributions to shareholders (4,228,516) (1,172,292) ------------ ------------ Capital stock transactions (Note D): Cost of 203,900 and 651,800 shares repurchased, respectively .................................. (1,947,040) (8,378,956) ------------ ------------ Total decrease in net assets .................... (12,992,810) (23,769,329) ------------ ------------ NET ASSETS Beginning of year ....................................... 54,840,252 78,609,581 ------------ ------------ End of year ............................................. $ 41,847,442 $ 54,840,252 ============ ============
================================================================================ See accompanying notes to financial statements. 14
================================================================================ PROGRESSIVE RETURN FUND, INC. FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Contained below is per share operating performance data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from information provided in the financial statements and market price data for the Fund's shares. - -------------------------------------------------------------------------------- For the Years Ended December 31, 2001 2000 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year ................. $ 12.37 $ 15.46 $ 18.31 $ 19.45 $ 17.43 Net investment income/(loss) ....................... -- #* (0.01)# 0.09# 0.12 0.05 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions ............................... (1.55) (3.17) (0.90) 4.43+ 6.11+ Net increase/(decrease) in net assets from operations .................................... (1.55) (3.18) (0.81) 4.55 6.16 Dividends and distributions to shareholders: Net investment income ...................... -- --* (0.08) (0.07) (0.01) Net realized gain on investments and foreign currency related transactions ...... -- (0.26) (2.08) (5.62) (4.13) In excess of net investment income ......... (1.00) -- -- -- -- Total dividends and distributions to shareholders .. (1.00) (0.26) (2.16) (5.69) (4.14) Anti-dilutive effect due to capital stock repurchased .................................. 0.08 0.35 0.12 -- -- Net asset value, end of year ....................... $ 9.90 $ 12.37 $ 15.46 $ 18.31 $ 19.45 Market value, end of year .......................... $ 8.950 $ 9.500 $ 13.063 $ 15.625 $ 15.813 Total investment return (a) ........................ 4.04% (27.27)% (1.84)% 32.56% 43.21% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000 omitted) .............. $ 41,847 $ 54,840 $ 78,609 $ 98,084 $ 103,444 Ratio of expenses to average net assets, net of fee waivers ................................. 1.63%(b) 2.46% 2.10% 1.50% 1.56% Ratio of expenses to average net assets, excluding fee waivers, if any ...................... 1.73%(c) 2.65% 2.28% 1.66% 1.73% Ratio of expenses to average net assets, net of fee waivers but excluding fees paid indirectly, if any ................................. 1.72% -- -- -- -- Ratio of net investment income/(loss) to average net assets ................................. 0.02% (0.06)% 0.59% 0.51% 0.23% Portfolio turnover rate ............................ 36.17% 38.13% 39.60% 48.52% 72.25% 1996 1995 1994 1993 1992 PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year ................. $ 13.29 $ 14.33 $ 12.52 $ 8.90 $ 10.77 Net investment income/(loss) ....................... 0.11 0.17 0.06 0.07 0.11 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions ............................... 4.11 (1.03) 1.81 3.55 (1.92) Net increase/(decrease) in net assets from operations .................................... 4.22 (0.86) 1.87 3.62 (1.81) Dividends and distributions to shareholders: Net investment income ...................... (0.08) (0.15) (0.06) -- (0.06) Net realized gain on investments and foreign currency related transactions ...... -- (0.03) -- -- -- In excess of net investment income ......... -- -- -- -- -- Total dividends and distributions to shareholders .. (0.08) (0.18) (0.06) -- (0.06) Anti-dilutive effect due to capital stock repurchased .................................. -- -- -- -- -- Net asset value, end of year ....................... $ 17.43 $ 13.29 $ 14.33 $ 12.52 $ 8.90 Market value, end of year .......................... $ 13.750 $ 11.125 $ 13.875 $ 14.125 $ 8.000 Total investment return (a) ........................ 24.28% (18.65)% (1.35)% 76.56% (17.34)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000 omitted) .............. $ 92,399 $ 70,431 $ 75,908 $ 66,351 $ 47,134 Ratio of expenses to average net assets, net of fee waivers ................................. 1.62% 1.58% 1.41% 1.97% 1.92% Ratio of expenses to average net assets, excluding fee waivers, if any ...................... 1.81% 1.76% 1.59% 2.00% -- Ratio of expenses to average net assets, net of fee waivers but excluding fees paid indirectly, if any ................................. -- -- -- -- -- Ratio of net investment income/(loss) to average net assets ................................. 0.75% 1.18% 0.43% 0.66% 1.07% Portfolio turnover rate ............................ 35.94% 35.73% 15.47% 24.47% 39.07% - ------------- + Includes $0.02 and $0.01 per share decrease to the Fund's net asset value resulting from the dilutive impact of shares issued pursuant to the Fund's dividend reinvestment plan in 1998 and 1997, respectively. # Based on average shares outstanding. * Amount is less than $0.01 per share. (a) Total investment return at market value is based on the changes in market price of a share during the year and assumes reinvestment of dividends and distributions, if any, at actual prices pursuant to the Fund's dividend reinvestment plan. Total investment return does not reflect brokerage commissions. (b) Expenses are net of fees paid indirectly. (c) Expenses exclude fees paid indirectly.
================================================================================ See accompanying notes to financial statements. 15 - -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE A. SIGNIFICANT ACCOUNTING POLICIES Progressive Return Fund, Inc. (the "Fund") was incorporated in Maryland on August 11, 1989 and commenced investment operations on November 9, 1989. As a result of a Special Meeting of Stockholders held on December 15, 2000, the Fund, formerly known as The Portugal Fund, Inc., changed its name and investment objective. Its investment objective is to seek total return, consisting of capital appreciation and current income through investing substantially all of its assets in equity securities of U.S. and non-U.S. companies and U.S. dollar denominated debt securities. The Fund is registered under the Investment Company Act of 1940, as amended, as a closed-end, non-diversified management investment company. The following is a summary of significant accounting policies consistently followed by the Fund: 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 primarily 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 are 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. At December 31, 2001, the Fund held no securities valued in good faith by the Board of Directors. The net asset value per share of the 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. REPURCHASE AGREEMENTS: The Fund has agreed to purchase securities from financial institutions subject to the sellers agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The financial institutions with whom the Fund enters into repurchase agreements are banks and broker/dealers, which Cornerstone Advisors, Inc. (the Fund's "Manager" or "Cornerstone") considers creditworthy. The seller under a repurchase agreement will be required to maintain the value of the securities as collateral, subject to the agreement at not less than the repurchase price plus accrued interest. Cornerstone monitors the daily mark to market of the value of the collateral, and, if necessary, requires the seller to maintain additional securities, so that the value of the collateral is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose the Fund to possible loss because of adverse market action or delays in connection with the disposition of the underlying securities. 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 the 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. For U.S. federal income tax purposes, realized capital losses incurred after ================================================================================ 16 - -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- October 31, 2001 within the current fiscal year are deemed to arise on the first day of the next fiscal year. The Fund elected to defer such losses of $263,892. The Fund has a capital loss carryforward of $11,780,944, of which $1,587,989 expires in 2008 and $10,192,955 expires in 2009. Differences between capital loss carryforwards on a book and tax basis primarily relate to timing of the recognition of gains for U.S. federal income tax purposes. There is no undistributable ordinary income on a tax basis. DISTRIBUTIONS OF INCOME AND GAINS: The Fund distributes at least annually to shareholders, substantially all of its net investment income and net realized short-term capital gains, if any. The Fund determines annually whether to distribute any net realized long-term capital gains in excess of net realized short-term capital losses, including capital loss carryforwards, 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 the Fund on the ex-dividend date. The Board of Directors of the Fund may, if it is determined to be in the best interest of the Fund and its shareholders, from time to time authorize and declare distributions 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. NOTE B. AGREEMENTS At the Annual Meeting of Stockholders of the Fund held on April 19, 2001, stockholders approved a new investment management agreement by and between Cornerstone and the Fund. As a result, Cornerstone commenced its performance of the investment management services with respect to the Fund's portfolio securities, and the temporary internal management of the Fund's portfolio securities automatically ceased. Effective April 19, 2001, Cornerstone serves as the Fund's investment manager with respect to all investments. As compensation for its investment management services, Cornerstone receives from the Fund an annual fee, calculated weekly and paid monthly, equal to 1.00% of the Fund's average weekly net assets. Cornerstone has voluntarily agreed to limit the Fund's annual operating expenses (excluding interest, taxes, brokerage commissions, expenditures which are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of such Fund's business) to 1.65% (on an annualized basis) of the Fund's average net assets for the fiscal period from April 19, 2001 through December 31, 2001. For the period April 19, 2001 through December 31, 2001, Cornerstone earned $331,733 for investment management services, of which Cornerstone waived $1,966. For the period January 1, 2001 through April 18, 2001, portfolio securities were managed by Messrs. Ralph W. Bradshaw and William A. Clark, a current and former director of the Fund, respectively. Internal management fees for this period of $30,466 are included in Directors' fees on the Statement of Operations. During such period the Fund assumed all of its own operating expenses. Included in the Statement of Operations, under the caption Fees paid indirectly, are expense offsets of $42,694 arising from credits earned on portfolio transactions executed with a broker pursuant to a directed brokerage arrangement. The Fund paid or accrued approximately $86,000 for the year ended December 31, 2001 for legal services to Spitzer & Feldman P.C., counsel to the Fund. Mr. Westle, a partner of the firm, serves as secretary of the Fund. ================================================================================ 17 - -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- At December 31, 2001, pursuant to regulatory filings, a single shareholder and his affiliates owned approximately 59% of the outstanding shares of the Fund based on a Schedule 13G/A filing with the Securities and Exchange Commission on February 15, 2002. NOTE C. INVESTMENT IN SECURITIES For U.S. federal income tax purposes, the cost of securities owned at December 31, 2001 was $48,216,238. Accordingly, the net unrealized depreciation of investments of $2,045,970 was composed of gross appreciation of $2,530,835 for those investments having an excess of value over cost and gross depreciation of $4,576,805 for those investments having an excess of cost over value. For the year ended December 31, 2001, purchases and sales of securities, other than short-term investments, were $52,474,173 and $16,327,346, respectively. NOTE D. SHARE REPURCHASE PROGRAM On October 21, 1998, the Fund announced that its Board of Directors had authorized the repurchase of up to 15% of the Fund's outstanding common stock, for purposes of enhancing shareholder value. The Fund's Board had authorized management of the Fund to repurchase such shares in open market transactions at prevailing market prices from time to time in a manner consistent with the Fund continuing to seek to achieve its investment objectives. The Board's actions were taken in light of the significant discounts at which the Fund's shares were trading. It is intended both to provide additional liquidity to those shareholders that elect to sell their shares and to enhance the net asset value of the shares held by those shareholders that maintain their investment. Effective October 22, 1999, the Fund committed to engage in an enhanced and aggressive repurchase program of the Fund's shares whenever those shares trade at more than a nominal discount to net asset value. Shares will be repurchased in open market transactions at prevailing market prices from time to time in a manner consistent with the Fund continuing to seek its investment objective. The repurchase program will be subject to review by the Board of Directors of the Fund. For the year ended December 31, 2001, the Fund repurchased 203,900 of its shares for a total cost of $1,947,040 at a weighted average discount of 15.67% from net asset value. The discount of the individual repurchases ranged from 8.62% - 20.86%. For the year ended December 31, 2000, the Fund repurchased 651,800 of its shares for a total cost of $8,378,956 at a weighted average discount of 16.86% from net asset value. The discount of the individual repurchases ranged from 13.30% - 24.20%. No limit has been placed on the number of shares to be purchased by the Fund other than those imposed by federal securities laws. All purchases will be made in accordance with federal securities laws, with shares repurchased held in treasury, effective January 1, 2001. NOTE E. SECURITIES LENDING To generate additional income, the Fund may lend up to 331/3% of its portfolio's assets. The Fund receives payments from borrowers equivalent to the dividends and interest that would have been earned on securities lent while simultaneously seeking to earn interest on the investment of cash collateral. Loans are subject to termination by the Fund or the borrower at any time, and are therefore, not considered to be illiquid investments. Loans of securities are required at all times to be secured by collateral equal to at least 100% of the market value of securities on loan. However, in the event of default or bankruptcy of the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. In the event that the borrower fails to return securities, and collateral maintained by the lender is insufficient to cover the value of loaned securities, the borrower is obligated to pay the amount of the shortfall (and interest thereon) to the Fund. However, there can be no assurance the Fund can recover this amount. The value of securities on loan to brokers and the related collateral received at December 31, 2001 was $717,864 and $755,986, ================================================================================ 18 - -------------------------------------------------------------------------------- PROGRESSIVE RETURN FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- respectively. Any cash collateral received is reinvested into repurchase agreements, which in turn are collateralized by various U.S. Government and Agency securities. During the year ended December 31, 2001, the Fund earned $1,630 in securities lending income which is included under the caption Interest in the Statement of Operations. NOTE F. COLLATERAL FOR REPURCHASE AGREEMENT Listed below is the collateral associated with the repurchase agreement with Bear, Stearns & Co. Inc. outstanding at December 31, 2001. Principal Amount Interest Accrued Market Issuer (000's) Rate Maturity Interest Value - ------ ------- ---- -------- -------- ----- United States Treasury Bond $605 3.625% 4/15/28 $4,630 $617,475 NOTE G. SETTLEMENT OF LEGAL ACTION In December 2000, the Fund reached a settlement which was approved by the court in the class action lawsuit in which it was a defendant along with its former investment adviser, Credit Suisse Asset Management Inc. ("CSAM") and the Fund's former directors (Brautigam v. Priest et al.). As a result, the Fund paid to the plaintiff's attorney $100,000 in fees and expenses and agreed to engage in certain business practices under the agreed settlement. The complaint, initially filed on June 10, 1999 in the United States District Court for the District of Delaware and thereafter transferred to the United States District Court for the Southern District of New York, alleged that the defendants breached their fiduciary duties to the Fund in violation of Sections 36 and 48 of the 1940 Act and Maryland law, by, inter alia, failing to put the interests of the Fund's shareholders before those of others, failing to take steps to reduce or eliminate the discount to net asset value at which shares of the Fund trade, and postponing the annual meeting of the Fund. In addition to plaintiff's attorney's fees mentioned above, the Fund incurred approximately $200,000 in legal expenses as a result of the lawsuit, of which approximately $145,000 was reimbursed to CSAM. Such amounts were accrued and paid by the Fund during the fiscal year ended December 31, 2000. 19 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Board of Directors and Shareholders of Progressive Return Fund, Inc.: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Progressive Return Fund, Inc. (the "Fund") at December 31, 2001, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the ten years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provided a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania February 18, 2002 20 - -------------------------------------------------------------------------------- DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN (UNAUDITED) - -------------------------------------------------------------------------------- Shareholders who have Shares registered directly in their own names automatically participate in the Fund's Dividend Reinvestment & Cash Purchase Plan (the "Plan"), unless and until an election is made to withdraw from the Plan on behalf of such participating shareholders. Shareholders who do not wish to have distributions automatically reinvested should so notify American Stock Transfer & Trust Co. (the "Agent") at 59 Maiden Lane, New York, NY 10038. Under the Plan, all of the Fund's dividends and other distributions to shareholders are reinvested in full and fractional Shares as described below. When the Fund declares an income dividend or a capital gain or other distribution (each, a "Dividend" and collectively, "Dividends"), the Agent, on the shareholders' behalf, will: (i) receive additional authorized shares from the Fund either newly issued or repurchased from shareholders by the Fund and held as treasury stock ("Newly Issued Shares") or, (ii) at the sole discretion of the Board of Directors, be authorized to purchase outstanding shares on the open market, on the NYSE or elsewhere, with cash allocated to it by the Fund ("Open Market Purchases"). Shares acquired by the Agent in Open Market Purchases will be allocated to the reinvesting shareholders based on the average cost of such Open Market Purchases. Alternatively, the Agent will allocate Newly Issued Shares to the reinvesting shareholders at a price equal to the average closing price of the Fund over the five trading days preceding the payment date of such dividend. Registered shareholders who acquire their shares through Open Market Purchases and who do not wish to have their Dividends automatically reinvested should so notify the Fund in writing. If a Shareholder has not elected to receive cash Dividends and the Agent does not receive notice of an election to receive cash Dividends prior to the record date of any Dividend, the shareholder will automatically receive such Dividends in additional Shares. Participants in the Plan may withdraw from the Plan by providing written notice to the Agent at least 30 days prior to the applicable Dividend payment date. When a participant withdraws from the Plan, or upon termination of the Plan as provided below, certificates for whole shares credited to his/her account under the Plan will, upon request, be issued. Whether or not a participant requests that certificates for whole shares be issued, a cash payment will be made for any fraction of a Share credited to such account. The Agent will maintain all shareholder accounts in the Plan and furnish written confirmations of all transactions in the accounts, including information needed by shareholders for personal and tax records. The Agent will hold shares in the account of each Plan participant in non-certificated form in the name of the participant, and each shareholder's proxy will include those shares purchased pursuant to the Plan. Each participant, nevertheless, has the right to receive certificates for whole shares owned. The Agent will distribute all proxy solicitation materials to participating shareholders. In the case of shareholders, such as banks, brokers or nominees, that hold shares for others who are beneficial owners participating in the Plan, the Agent will administer the Plan on the basis of the number of shares certified from time to time by the record shareholder as representing the total amount of shares registered in the Shareholder's name and held for the account of beneficial owners participating in the Plan. There will be no charge to participants for reinvesting Dividends other than their share of brokerage commissions as discussed below. The Agent's fees for administering the Plan and handling the reinvestment of Dividends will be paid by the Fund. Each participant's account will be charged a pro-rata share of brokerage commissions incurred with respect to the Agent's Open Market Purchases in connection with the reinvestment of Dividends. Brokerage charges for purchasing small amounts of shares for individual accounts through the Plan ================================================================================ 21 - -------------------------------------------------------------------------------- DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN (UNAUDITED) (CONCLUDED) - -------------------------------------------------------------------------------- are expected to be less than the usual brokerage charges for such transactions because the Agent will be purchasing shares for all the participants in blocks and pro-rating the lower commission that may be attainable. The automatic reinvestment of Dividends will not relieve participants of any income tax that may be payable on such Dividends. Participants who receive shares pursuant to the Plan as described above will recognize taxable income in the amount of the fair market value of those shares. In the case of non-U.S. participants whose Dividends are subject to U.S. income tax withholding and in the case of participants subject to 30% federal backup withholding, the Agent will reinvest Dividends after deduction of the amount required to be withheld. The Fund reserves the right to amend or terminate the Plan by written notice to participants. All correspondence concerning the Plan should be directed to the Agent at the address referred to in the first paragraph of this section.
- -------------------------------------------------------------------------------- ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS AND OFFICERS (unaudited) - -------------------------------------------------------------------------------- Name and Position(s) Principal Occupation Position With Address (Age) Held with Fund Over Last 5 Years Fund Since - ------------------------------------------------------------------------------------------------------------------ Ralph W. Bradshaw* (51) Chairman of the President, Director and Shareholder of 1999; current One West Pack Square Board of Directors Cornerstone Advisors, Inc.; Financial term ends at Suite 1650 and President Consultant; Vice President, Deep the 2002 Asheville, NC 28801 Discount Advisors, Inc. (1993-1999); Annual Director of The Austria Fund, Inc., Meeting. The SmallCap Fund, EIS Fund, Inc., The Cornerstone Strategic Return Fund, Inc., and Cornerstone Strategic Value Fund, Inc. Thomas H. Lenagh (79) Director Chairman of the Board of Inrad Corp.; 2001; current 13 Allen's Corner Rd. Independent Financial Adviser; Director of term ends at Flemington, NJ 08822 The Cornerstone Strategic Return Fund, Inc., the 2004 Cornerstone Strategic Value Fund, Inc., Annual Gintel Fund, The Adams Express Company Meeting. and Petroleum and Resources Corporation, ICN Pharmaceuticals International. Edwin Meese III (70) Director Distinguished Fellow, The Heritage 1999; current The Heritage Foundation Foundation, Washington D.C.; Distinguished term ends at 214 Massachusetts Ave NE Visiting Fellow at the Hoover Institution, the 2002 Washington D.C. 20002 Stanford University; Distinguished Senior Annual Fellow at the Institute of United States Meeting. Studies, University of London; Formerly U.S. Attorney General under President Ronald Reagan; Director of The Cornerstone Strategic Return Fund, Inc., Cornerstone Strategic Value Fund, Inc. and Perregrine Corporation (2001). ================================================================================ 22 - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS AND OFFICERS (unaudited) (CONTINUED) - -------------------------------------------------------------------------------- Name and Position(s) Principal Occupation Position With Address (Age) Held with Fund Over Last 5 Years Fund Since - ------------------------------------------------------------------------------------------------------------------ Scott B. Rogers (46) Director Chief Executive Officer, Asheville Buncombe 2000; current 30 Cumberland Ave. Community Christian Ministry; President, term ends at Asheville, NC 28801 ABCCM Doctor's Medical Clinic; Director, the 2003 Southeastern Jurisdiction Urban Networkers; Annual Director, A-B Vision Board, Appointee, NC Meeting. Governor's Commission on Welfare to Work; Chairman and Director, Recycling Unlimited; Director, Interdenominational Ministerial Alliance; Director of The Cornerstone Strategic Return Fund, Inc., Cornerstone Strategic Value Fund, Inc., and EIS Fund, Inc. Andrew A. Strauss (48) Director Attorney and senior member of Strauss & 2000; current 77 Central Avenue Associates, P.A., Attorneys, Asheville and term ends at Suite F Hendersonville, NC; previous President of the 2004 Asheville, NC 28801 White Knight Healthcare, Inc. and LMV Annual Leasing, Inc., a wholly owned subsidiary of Meeting. Xerox Credit Corporation; Director of The Cornerstone Strategic Return Fund, Inc., Cornerstone Strategic Value Fund, Inc., EIS Fund, Inc., Memorial Mission Hospital Foundation and Deerfield Episcopal Retirement Community. Glenn W. Wilcox, Sr. (70)Director Chairman of the Board and Chief Executive 2000; current One West Pack Square Officer of Wilcox Travel Agency; Director, term ends at Suite 1700 Champion Industries, Inc.; Chairman of Tower the 2003 Asheville, NC 28801 Associates, Inc. (a real estate venture); Annual Member of the Board of Wachovia Corp.; Meeting. Board Trustee and Chairman, Appalachian State University; Board Trustee and Director, Mars Hill College; Director of The Cornerstone Strategic Return Fund, Inc., Cornerstone Strategic Value Fund, Inc., and EIS Fund, Inc. Gary A. Bentz (45) Vice President Director and Shareholder of Cornerstone 2001 One West Pack Square and Treasurer Advisors, Inc.; Independent Financial, Suite 1650 Accounting, Investment Consultant and Asheville, NC 28801 Certified Public Accountant; Vice President, Deep Discount Advisors, Inc. (1993-2000); Director of The Austria Fund, Inc.; Director, Vice President and Treasurer of EIS Fund, Inc.; Vice President and Treasurer of The Cornerstone Strategic Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc. ================================================================================ 23 - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS AND OFFICERS (unaudited) (CONCLUDED) - -------------------------------------------------------------------------------- Name and Position(s) Principal Occupation Position With Address (Age) Held with Fund Over Last 5 Years Fund Since - ------------------------------------------------------------------------------------------------------------------ Thomas R. Westle (48) Secretary Partner, Spitzer & Feldman P.C. (May 1998 - 2000 405 Park Avenue present) prior thereto; a Partner at Battle New York, NY 10022 Fowler LLP. - ------------- * Designates a director who is an "interested person" of the Fund as defined by the Investment Company Act of 1940. Mr. Bradshaw is an interested person of the Fund by virtue of his current position as Chairman of the Board of Directors and Investment Manager of the Fund.
- -------------------------------------------------------------------------------- SUMMARY OF GENERAL INFORMATION - -------------------------------------------------------------------------------- The Fund-- Progressive Return Fund, Inc. is a closed-end, non-diversified management investment company whose shares trade on the New York Stock Exchange. Its investment objective is to seek total return, consisting of capital appreciation and current income through investing substantially all of its assets in equity securities of U.S. and non-U.S. companies and U.S. dollar denominated debt securities. The Fund is managed by Cornerstone Advisors, Inc. On February 13, 2002, the Board of Directors of the Fund adopted certain amendments to the Fund's Bylaws. The amendments reduce the quorum requirement for shareholders' meetings from a majority to one-third, and require a shareholder to provide written notice to the Secretary of the Fund of any proposal which the shareholder wishes to raise at an annual meeting of shareholders which was not included in the Fund's proxy materials at least 90 calendar days in advance of the date of the mailing of the notice for the preceding year's annual meeting. The amendments also impose a 90 calendar day advance written notice requirement on shareholders who wish to introduce at any meeting of shareholders a nominee for election as a director. The notice provisions were adopted to afford shareholders a fair opportunity to present matters for consideration at annual meetings while ensuring that the Fund and its directors will have a reasonable opportunity to thoughtfully consider the matters proposed. Please contact the Secretary of the Fund for additional information about the advance notice requirements if you are considering presenting a proposal at an annual meeting. - -------------------------------------------------------------------------------- SHAREHOLDER INFORMATION - -------------------------------------------------------------------------------- The Fund is listed on the New York Stock Exchange (symbol "PGF"). The share price is published in: The New York Times (daily) under the designation "ProgRetFd" and The Wall Street Journal (daily) and Barron's (each Monday) under the designation "PrgrssvRetFd." The net asset value per share is published under "Closed-End Funds" each Sunday in The New York Times and each Monday in The Wall Street Journal and Barron's under the designation "ProgessvFd." - -------------------------------------------------------------------------------- Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that Progressive Return Fund, Inc. may from time to time purchase shares of its capital stock in the open market. - -------------------------------------------------------------------------------- ================================================================================ 24 - -------------------------------------------------------------------------------- PRIVACY POLICY NOTICE - -------------------------------------------------------------------------------- The following is a description of Progressive Return Fund, Inc.'s (the "Fund") policies regarding disclosure of nonpublic personal information that you provide to the Fund or that the Fund collects from other sources. In the event that you hold shares of the Fund through a broker-dealer or other financial intermediary, the privacy policy of the financial intermediary would govern how your nonpublic personal information would be shared with unaffiliated third parties. CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following nonpublic personal information about you: 1. Information from the Consumer: this category includes information the Fund receives from you on or in applications or other forms, correspondence, or conversations (such as your name, address, phone number, social security number, assets, income and date of birth); and 2. Information about the Consumer's transactions: this category includes information about your transactions with the Fund, its affiliates, or others (such as your account number and balance, payment history, parties to transactions, cost basis information, and other financial information). CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any nonpublic personal information about their current or former shareholders to unaffiliated third parties, except as required or permitted by law. The Fund is permitted by law to disclose all of the information it collects, as described above, to its service providers (such as the Fund's custodian, administrator and transfer agent) to process your transactions and otherwise provide services to you. CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic personal information to those persons who require such information to provide products or services to you. The Fund maintains physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information. May 2001 ================================================================================ 25 PROGRESSIVE RETURN FUND, INC. ================================================================================ DIRECTORS AND CORPORATE OFFICERS Ralph W. Bradshaw Chairman of the Board of Directors and President Thomas H. Lenagh Director Edwin Meese III Director Scott B. Rogers Director Andrew A. Strauss Director Glenn W. Wilcox, Sr. Director Gary A. Bentz Vice President and Treasurer Thomas R. Westle Secretary INVESTMENT MANAGER SHAREHOLDER SERVICING AGENT Cornerstone Advisors, Inc. American Stock Transfer & One West Pack Square Trust Co. Suite 1650 59 Maiden Lane Asheville, NC 28801 New York, NY 10038 ADMINISTRATOR INDEPENDENT ACCOUNTANTS Bear Stearns Funds PricewaterhouseCoopers LLP Management Inc. Two Commerce Square 383 Madison Avenue Philadelphia, PA 19103 New York, NY 10179 LEGAL COUNSEL CUSTODIAN Spitzer & Feldman P.C. Custodial Trust Company 405 Park Avenue 101 Carnegie Center New York, NY 10022 Princeton, NJ 08540 EXECUTIVE OFFICES 383 Madison Avenue New York, NY 10179 For shareholder inquiries, registered shareholders should call (800) 937-5449. For general inquiries, please call (212) 272-2093. PGF LISTED NYSE(R) This report, including the financial statements herein, is sent to the shareholders of the Fund for their information. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in this report. -----END PRIVACY-ENHANCED MESSAGE-----