SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant toss.240.14a-11(c) orss.240.14a-12
THE PORTUGAL FUND, INC.
-----------------------
Name of Registrant as Specified In Its Charter
N/A
---
Name of Person(s) Filing Proxy Statement if other than the Registrant
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which such offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(i)
<PAGE>
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
(ii)
<PAGE>
PRELIMINARY PROXY MATERIAL FOR THE INFORMATION OF THE
SECURITIES AND EXCHANGE COMMISSION ONLY
THE PORTUGAL FUND, INC.
575 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
-----------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on:
FRIDAY, DECEMBER 15, 2000
TO THE STOCKHOLDERS OF THE PORTUGAL FUND, INC.
----------------------------------------------
NOTICE IS HEREBY GIVEN, that a Special Meeting (the "Meeting") of Stockholders
of The Portugal Fund, Inc. (the "Fund") will be held at the executive offices of
Bear Stearns Funds Management Inc. 245 Park Avenue, 7th Floor, New York, New
York 10167, in Conference Room F on Friday, December 15, 2000 at 10:00 a.m., for
the following purposes:
1. To elect two (2) Class II Directors for the Fund to hold office
until their successors are duly elected and qualified. (Proposal 1);
2. To approve certain modifications to the Fund's investment
policies, which, if approved, will have the effect of broadening the scope of
the Fund's investment strategies from one of investing primarily in "Portuguese
securities", to one of investing primarily in "the securities of U.S. and
non-U.S. issuers." (Proposals 2(a), 2(b) and 2(c)); and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on October 27, 2000 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Meeting.
By Order of the Board of Directors,
William A. Clark
Secretary
Dated: October 27, 2000
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON AND WISH YOUR STOCK TO BE
VOTED, PLEASE COMPLETE, SIGN AND DATE THE PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IT IS
IMPORTANT THAT YOUR PROXY CARD BE RETURNED PROMPTLY IN ORDER TO AVOID THE
ADDITIONAL EXPENSE OF FURTHER SOLICITATION. IF YOU OWN YOUR SHARES THROUGH BANK
OR BROKERAGE ACCOUNTS, YOU SHOULD BRING PROOF OF YOUR OWNERSHIP IF YOU WISH TO
ATTEND THE MEETING.
<PAGE>
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
<PAGE>
THE PORTUGAL FUND, INC.
575 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, DECEMBER 15, 2000
GENERAL INFORMATION
The Proxy Statement is furnished in connection with a solicitation of
proxies by the Board of Directors (the "Board") of The Portugal Fund, Inc. (the
"Fund") for use at the Special Meeting of Stockholders (the "Meeting") of the
Fund to be held at the executive offices of Bear Stearns Funds Management Inc.
245 Park Avenue, 7th Floor, New York, New York 10167, in Conference Room F on
Friday, December 15, 2000 at 10:00 a.m., New York time, and at any and all
adjournments thereof. A form of proxy is enclosed herewith. This Proxy Statement
and the accompanying form of proxy are first being mailed to stockholders on or
about November 3, 2000.
Any stockholder who executes and delivers a proxy may revoke it by
written communication to the Secretary of the Fund at any time prior to its use
or by voting in person at the Meeting. Unrevoked proxies that are properly
executed and returned in time to be voted at the Meeting will be voted in
accordance with the specifications thereon and, unless specified to the
contrary, will be voted FOR the election of Directors, and FOR the approval of
certain modifications to the Fund's investment policies, which will have the
effect of broadening the scope of the Fund's investment strategies from one of
investing primarily in "Portuguese Securities", to one of investing primarily in
"the securities of U.S. and non-U.S. Issuers".
In general, abstentions and broker non-votes (reflected by signed but
unvoted proxies), as defined below, count for purposes of obtaining a quorum but
do not count as votes cast with respect to any proposal. With respect to
Proposal 1 requiring a plurality vote, which is a simple majority of the votes
cast at the Meeting, abstentions and broker non-votes have no effect on the
outcome of this proposal. Broker non-votes are shares held in the name of the
broker or nominee for which an executed proxy is received by the Fund, but are
not voted on a proposal because voting instructions have not been received from
the beneficial owners or persons entitled to vote and the broker or nominee does
not have discretionary voting power.
In the event that a quorum is not present at the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting to a date
not more than 120 days after the original record date to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares represented at the Meeting in person or by proxy.
The persons named as proxies will vote those proxies which they are entitled to
vote FOR or AGAINST any such proposal in their discretion. Under the By-laws of
the Fund, a quorum is constituted by the presence in person or by proxy of the
holders of record of a majority of the outstanding shares of Common Stock of the
Fund entitled to vote at the Meeting.
1
<PAGE>
The costs of soliciting proxies will be borne by the Fund. Proxy
solicitations will be made primarily by mail, but solicitations may also be made
by telephone, telegraph or personal interviews conducted by officers or
employees of the Fund, the investment adviser, Credit Suisse Asset Management,
LLC ("CSAM"), Bear Stearns Funds Management Inc., the administrator to the Fund
(the "Administrator"), or Shareholder Communications Corporation ("SCC"), a
proxy solicitation firm that has been retained by the Fund. The agreement
between the parties provides for SCC to provide general solicitation services to
the Fund at an estimated cost of $6,000, plus reimbursement for reasonable
expenses, estimated at a cost of $7,000. The Fund will, upon request, bear the
reasonable expenses of brokers, banks and their nominees who are holders of
record of the Fund's Common Stock on the record date, incurred in mailing copies
of this Notice of Meeting and Proxy Statement and the enclosed form of proxy to
the beneficial owners of the Fund's Common Stock.
The Fund is a closed-end management investment company with a single
class of Common Stock, $.001 par value per share. Only holders of issued and
outstanding shares of the Fund's Common Stock of record at the close of business
on October 27, 2000 are entitled to notice of, and to vote at, the Meeting. Each
such holder is entitled to one vote per share of Common Stock so held and
fractional shares are entitled to proportionate shares of one vote. The total
number of shares of Common Stock outstanding on October 27, 2000 was
_______________.
The principal executive office of CSAM is 466 Lexington Avenue, New
York, New York 10017. The Administrator has its principal executive office at
575 Lexington Avenue, 9th Floor, New York, New York 10022.
The Fund's Annual Report containing audited financial statements for
the fiscal year ending December 31, 1999 has previously been furnished to the
stockholders of the Fund. The report is not to be regarded as proxy-soliciting
material.
In order that your shares of Common Stock may be represented at the
Meeting, you are requested to:
-- Indicate your instructions on the proxy;
-- Date and sign the proxy;
-- Mail the proxy promptly in the enclosed envelope; and
-- Allow sufficient time for the proxy to be received
before the commencement of the Meeting on December 15,
2000.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
In accordance with the Fund's Articles of Incorporation, the Fund's
Board of Directors (the "Board") is divided into three classes, Class I, Class
II and Class III, each Class having a term of three years. Each year the term of
office of one Class expires and the successor or successors of that Class are
elected to serve for a three year term.
At a meeting of the Board held on April 28, 2000, Mr. William A.
Priest, Jr. tendered his resignation as a Class I Director of the Fund effective
immediately. The Board accepted his resignation, resolved to expand the size of
the Board from 6 to 7 and appointed Messrs. William A. Clark and Andrew Strauss
to each serve as Class I Directors whose terms expire at the annual meeting of
stockholders in 2001.
In May, 2000, Messrs. Ron Olin and Martin M. Torino each tendered their
resignations to the Board as a Class I Director and Class II Director,
respectively. The Board accepted their resignations and then elected to resign
the seats on the Board occupied by Messrs. Olin and Torino and reduce the number
of seats on the Board from 7 to 5.
As a result of the resignations of Messrs. Priest, Olin and Torino and
the reduction of the number of seats on the Board from 7 to 5, the Board
currently consists of five Directors. These include one Class II Director, Mr.
Ralph W. Bradshaw, two Class III Directors, Messrs. Glenn W. Wilcox, Sr. and
Scott B. Rogers, and the two Class I Directors, Messrs. Clark and Strauss,
appointed by the Board on April 28, 2000.
The term of office of the Class II Director, Mr. Bradshaw, expires at
the annual meeting of stockholders in 2002, and the term of office of the Class
III Directors, Messrs. Wilcox and Rogers expires at the annual meeting of
stockholders in 2003, or thereafter in each case until their successors are duly
elected and qualified.
At the Meeting, stockholders will be asked to elect Messrs. Clark and
Strauss as Class I Directors to hold office until the year 2001 annual meeting
of stockholders or thereafter until each of their successors is duly elected and
qualified. If elected, each of Messrs. Clark and Strauss has consented to
continue to serve as a director of the Fund until their successors are duly
elected and qualified.
The persons named in the accompanying form of proxy intend to vote at
the Meeting (unless directed not to vote) FOR the election of William A. Clark
and Andrew Strauss. If either of Messrs. Clark or Strauss 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 ages and principal occupations of
each of the nominees for election as Class I Directors, and the number of shares
of Common Stock of the Fund beneficially owned by each of them, directly or
indirectly, as of October 27, 2000. Each Director has sole voting and investment
power with respect to any shares of the Fund beneficially owned by such
Director. Directors who are "interested persons" of the Fund, as that term is
defined in the Investment Company Act of 1940 ("1940 Act"), are indicated by an
asterisk that appears beside their name:
3
<PAGE>
NOMINEES
--------
Class I Director Nominees to serve until the Year 2001 Annual Meeting of
Stockholders. Directors who are "interested persons" of the Fund, as that term
is defined in the 1940 Act, by virtue of their being executive officers of the
Fund, are indicated by an asterisk that appears beside their name:
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY
DIRECTOR PRINCIPAL OCCUPATION OWNED AS OF
NAME AND ADDRESS SINCE AGE DURING PAST FIVE YEARS OCTOBER 27, 2000
---------------- ----- --- ---------------------- ----------------
<S> <C> <C> <C> <C>
William A. Clark* 2000 55 Consultant to Deep Discount [2,900]
One West Pack Square Advisors, Inc. and Ron Olin
Suite 777 Investment Management, Inc.,
Asheville, NC 28801 investment advisory firms;
Director of The Austria Fund,
Inc., Cornerstone Strategic
Return Fund, Inc. and Clemente
Strategic Value Fund, Inc.
Andrew A. Strauss
77 Central Avenue 2000 45 Attorney and senior member of -0-
Suite F Strauss & Associates, P.A.,
Asheville, NC 28801 attorneys, Asheville, N.C.;
previous President of White
Knight Healthcare, Inc. and LMV
Leasing, Inc., a wholly owned
subsidiary of Xerox Credit
corporation; Director of
Cornerstone Strategic Return
Fund, Inc. and Clemente Strategic
Value Fund, Inc.
</TABLE>
4
<PAGE>
REMAINING BOARD OF DIRECTORS
The following tables set forth the names, ages and principal occupations of each
of the remaining Directors of the Fund, and the number of shares of Common Stock
of the Fund beneficially owned by them, directly or indirectly, as of October
27, 2000. Each Director has sole voting and investment power with respect to any
shares of the Fund beneficially owned by such Director. Directors who are
"interested persons" of the Fund, as that term is defined in the 1940 Act, by
virtue of their being executive officers of the Fund, are indicated by an
asterisk that appears beside their name:
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED DIRECTLY
DIRECTOR PRINCIPAL OCCUPATION OR INDIRCTLY ON
NAME AND ADDRESS SINCE AGE OVER THE LAST 5 YEARS OCTOBER 27, 2000
---------------------------------------- ------------------------------------- -------------------------
<S> <C> <C> <C> <C>
Ralph W. Bradshaw* 1999 50 Consultant to Deep Discount [300]
One West Park Square Advisors, Inc. and Ron Olin
Suite 777 Investment Management Co.,
Asheville, NC 28801 investment advisory firms, Director
of The Austria Fund, Inc.,
Cornerstone Strategic Return Fund,
Inc. and Clemente Strategic Value
Fund, Inc.
Glenn W. Wilcox, Sr. 2000 67 Chairman of the Board and Chief -0-
One West Park Square Executive Officer of Wilcox Travel
Suite 1700 Agency; Director, Champion
Asheville, NC 28801 Industries, Inc.; Chairman, the
Board of Blue Ridge Printing Co.,
Inc.; Chairman, Tower Associates,
Inc. (a real estate venture),
Director, Asheville Chamber of
Commerce; Vice Chairman, the Board
of First Union National Bank;
Trustee, Appalachian State
University; Trustee and Director,
Mars Hill College; Director of
Cornerstone Strategic Return Fund,
Inc. and Clemente Strategic Value
Fund, Inc.
5
<PAGE>
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED DIRECTLY
DIRECTOR PRINCIPAL OCCUPATION OR INDIRECTLY ON
NAME AND ADDRESS SINCE AGE OVER THE LAST 5 YEARS OCTOBER 27, 2000
----------------------------------------------------------------------- -------------------------
Scott B. Rogers 2000 44 Chief Executive Officer, Asheville -0-
30 Cumberland Ave. Buncombe Community Christian
Asheville, NC 28801 Ministry; President, ABCCM Doctor's
Medical Clinic; Director, National
Urban Strategy Commission;
Director, Southeastern Jurisdiction
Urban Networkers; Director,
Asheville Area Red Cross;
Appointee, NC Governor's Commission -0-
on Welfare to Work; Chairman,
Recycling Unlimited; Director,
Interdenominational Ministerial
Alliance; Director, Cornerstone
Strategic Return Fund, Inc. and
Clemente Strategic Value Fund, Inc.
</TABLE>
EXECUTIVE OFFICERS
At the meeting of the Board held on April 28, 2000, the Board elected Mr.
Bradshaw President of the Fund and Chairman of the Board, and elected Mr. Clark
Secretary and Treasurer. Each of the executive officers will hold office until
his successor is duly elected by the Board of Directors.
6
<PAGE>
AUDIT COMMITTEE
---------------
The Fund's Audit Committee is currently composed of Messrs. Wilcox, Strauss, and
Rogers. The principal functions of the Audit Committee are to recommend to the
Board the appointment of the Fund's independent accountants, to review with the
independent accountants the scope and anticipated cost of their audit and to
receive and consider a report from the independent accountants concerning their
conduct of the audit, including any comments or recommendations they might want
to make in connection thereto. The Audit Committee convened twice during the
fiscal year ended December 31, 1999. The Fund has no nominating or compensation
committees.
Each Director attended at least 75% or more of the aggregate number of the Board
and committee meetings held during the period for which he was a Director.
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 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, 1999, to each Director of the Fund. No remuneration
was paid to any Director by any other investment companies advised by CSAM
during that period. Please note that the Fund has no bonus, profit sharing,
pension or retirement plans.
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FROM OTHER FUNDS TOTAL
NAME OF DIRECTOR DIRECTOR SINCE FUND FOR 1999 ADVISED BY CSAM COMPENSATION
---------------- -------------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
Ralph W. Bradshaw 1999 $1,750 $0 $1,750
Glenn W. Wilcox, Sr. 2000 $0 $0 $0
William A. Clark 2000 $0 $0 $0
Andrew A. Strauss 2000 $0 $0 $0
Scott B. Rogers 2000 $0 $0 $0
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and Section 30(h)
of the 1940 Act in combination require the Fund's Directors and officers,
persons who own more than 10% of the Fund's Common Stock, the Fund's investment
adviser and its directors and officers, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and the New York Stock
Exchange, Inc. The Fund believes that the Fund's directors and officers, the
Fund's investment adviser and its respective directors and officers have
complied with applicable filing requirements during the year ended December 31,
1999.
7
<PAGE>
THE BOARD OF DIRECTORS RECOMMEND THAT THE STOCKHOLDERS VOTE
"FOR" THE ELECTION OF WILLIAM A. CLARK AND ANDREW A.STRAUSS AS
CLASS I DIRECTORS OF THE FUND
REQUIRED VOTE
-------------
Directors are elected by a plurality (a simple majority of the votes
cast at the meeting) of the votes cast by the holders of shares of Common Stock
of the Fund present in person or represented by proxy at a meeting with a quorum
present. For purposes of the election of Directors, abstentions and broker
non-votes will be counted as shares present for quorum purposes, but will not be
considered votes cast.
PROPOSAL 2
MODIFICATION OF THE FUND'S FUNDAMENTAL POLICIES
TO BROADEN THE SCOPE OF THE FUND'S INVESTMENT STRATEGY
THE PROPOSALS
-------------
The Board of Directors, at its special meeting held on October 6, 2000
unanimously approved and authorized for submission to stockholders, certain
modifications to the Fund's investment strategies and fundamental investment
policies that would have the effect of broadening the focus of the Fund's
investment strategy from that of investing primarily in Portuguese securities to
that of investing primarily in the securities of U.S. and non-U.S. issuers.
Under the proposals, which are set forth in more detail below, the Fund's
overall investment objective of total return consisting of capital appreciation
and current income would not change. The Board recommends only that the Fund be
permitted to seek to achieve its stated investment objective without
concentrating solely in Portugal in order to allow it to exploit profitable
investment opportunities presented by the securities of issuers that trade on a
U.S. securities exchange or over-the-counter, or as American Depositary Receipts
("ADRs") or International Depositary Receipts ("IDRs") that trade in the United
States.
Specifically, the Board proposes the following modifications:
PROPOSAL 2(A):
-------------
CURRENT: The Fund's investment objective is total return consisting of capital
appreciation and current income, which it seeks to achieve by investing
PRIMARILY IN PORTUGUESE EQUITY AND DEBT SECURITIES.
PROPOSED: The investment objective of the Fund is total return consisting of
capital appreciation and current income, which it seeks to achieve by investing
primarily IN THE EQUITY AND U.S. DOLLAR DENOMINATED DEBT SECURITIES OF U.S. AND
NON-U.S. ISSUERS.
8
<PAGE>
PROPOSAL 2(B):
-------------
CURRENT: It is the policy of the Fund, under normal market conditions, to invest
substantially all of its assets, but in no event less than 75% of its assets, in
Portuguese equity and debt securities.
PROPOSED: It is the policy of the Fund, under normal market conditions, to
invest substantially all of its assets in the equity and U.S. dollar denominated
debt securities of U.S. and non-U.S. issuers whose securities trade on a U.S.
securities exchange or over the counter or as ADRs or other forms of depositary
receipts such as IDRs which trade in the United States.
PROPOSAL 2 (C):
---------------
CURRENT: The remainder of the Fund's assets may be invested in non-Portuguese
equity and debt securities of corporate and government entities and, for cash
management purposes, short-term instruments. Normally, the portion of the Fund's
assets that is not invested in Portuguese securities and short-term instruments
will be invested in securities of companies that can be expected to benefit from
the improvement in the Portuguese securities market or economy.
PROPOSED: Up to 15% of the Fund's assets may be invested in non-U.S. equity
securities not listed or traded in the U.S. and non-U.S. dollar denominated debt
securities.
INTERNAL MANAGEMENT OF THE FUND
-------------------------------
As stated above, at a meeting of the Board, held on October 6, 2000, an
ad hoc investment committee of the Board, comprised of Messrs. Bradshaw, Clark
and Strauss (the "Ad Hoc Committee"), recommended to the entire Board that the
Board should consider that the Fund broaden the focus of its investment strategy
from that of investing primarily in Portuguese securities to that of investing
primarily in the securities of U.S. and non-U.S. issuers (as more fully
described below).
Based on the findings of the Ad Hoc Committee and the Board's
determination that it would be in the best interests of the Fund and its
shareholders to modify the investment strategies as per the Ad Hoc Committee's
recommendation, this proposal #2 was authorized for inclusion in this proxy
statement as an item to be submitted to the shareholders for their approval.
For purposes of ensuring a smooth transition, CSAM has agreed that it
will continue to serve as investment adviser to the Fund after the modifications
to the Fund's policies are approved. However, representatives of CSAM have
informed the Board, given the proposed new direction of the Fund, that if this
proposal 2 is approved by the Fund's stockholders, CSAM will not continue to
serve as the Fund's investment adviser beyond its participation in the orderly
liquidation of the Portuguese securities currently held in the Fund's investment
portfolio which is scheduled to occur prior to the end of this calendar year.
Accordingly, at the Board's meeting held on October 6, 2000, the Board voted
unanimously to accept the provisional resignation of CSAM and terminate the
Investment Advisory Agreement between the Fund and CSAM effective December 31,
2000 in the event this proposal 2 is approved by the Fund's stockholders. CSAM
will continue to serve as the Fund's investment adviser if this proposal is
disapproved.
Subject to the approval of this proposal 2 by the Fund's stockholders,
the Board has also determined that to properly consider all of the alternatives,
including a possible search for a new investment adviser, it would be in the
best interests of the Fund and its shareholders to adopt a proposal authorizing
the internal management of the Fund's portfolio securities by Messrs. Bradshaw
and Clark, the Executive Officers of the Fund with over 25 years of combined
experience between them in the financial services and asset management
9
<PAGE>
industries. Subject to the approval of this proposal, Messrs. Bradshaw and Clark
will collectively assume portfolio management responsibilities for the Fund. In
consideration for the additional time and efforts to be dedicated to the Fund by
Messrs. Bradshaw and Clark as a result of their serving as internal managers of
the Fund's portfolio, Messrs. Bradshaw and Clark will each receive, as a
supplement to their current Directors' fees, an amount equal to $80,000 per
year. The Board, in adopting this proposal, has agreed that Messrs. Bradshaw and
Clark, while assuming the day-to-day responsibilities with respect to the Fund's
investment portfolio, will not be required to dedicate their full time and
efforts to the management of the Fund's investment portfolio.
To effectuate an efficient reporting structure that will afford an
appropriate level of oversight of Messrs. Bradshaw and Clark's activities as the
Fund's internal portfolio managers, the Board has reconstituted and renamed the
Ad Hoc Committee as the Investment Oversight Committee by removing Messrs.
Bradshaw and Clark from the committee and replacing them with the remaining
disinterested directors of the Board. Messrs. Bradshaw and Clark will report to
the newly constituted Investment Oversight Committee, to be chaired by Mr.
Strauss, on a monthly basis.
The Board will continue to monitor its decision to have the Fund's
portfolio managed internally and will determine whether this management approach
should be adopted as a permanent measure or whether a search should be conducted
to locate an investment adviser to assume external management of the Fund's
portfolio. The Board believes that such a determination will, in all likelihood,
be made prior to the annual meeting of stockholders scheduled to be held in
April of 2001, allowing sufficient time for shareholders to consider the
approval of a new investment advisory agreement with an external manager, should
the Board ultimately determine that such an arrangement is in the best interests
of the Fund and its stockholders.
BASIS FOR RECOMMENDATION OF PROPOSALS
-------------------------------------
In submitting this proposal for approval by the Fund's stockholders,
the Board has determined that the proposed modification to the Fund's
fundamental investment strategies and policies would benefit the Fund's
stockholders by providing a broader basket of potential portfolio securities
than is currently available to the Fund in more diversified, liquid and
efficient capital markets than is the case in Portugal. The Board believes that
a broader selection of potential investments in U.S. and non-U.S. securities
markets will increase the Fund's prospects of achieving its investment objective
by structuring a more diversified investment portfolio. Meanwhile, trading in
U.S. securities and in non-U.S. securities that trade in the U.S. will permit
the Fund to reduce its risk exposure to Portuguese currency and capital markets
without precluding the Fund from exploring investment opportunities presented by
non-U.S. securities throughout Europe and Asia about which more analyst coverage
and investor information is available. Finally, under the proposal pursuant to
which Messrs. Bradshaw and Clark will internally manage the Fund's investment
portfolio, the annual cost of obtaining investment advisory services for the
Fund will be considerably less than the Fund's current 1% advisory fee paid to
CSAM. The Fund should also receive additional cost savings as a result of
decreased custodial expenses.
10
<PAGE>
The recommendation of this Proposal 2 is driven by the Board's desire
to improve Fund performance and its belief that access to U.S. and non-U.S.
securities is becoming increasingly necessary to exploit investment
opportunities in a global economy and is therefore potentially more beneficial
to the Fund's stockholders than is a policy that concentrates the Fund's
investments solely in an emerging market, such as Portugal.
For example, as of June 30, 2000, the Fund held approximately 45% of
its assets in the equity of only two companies due, in large part, to the
limited number of Portuguese equity and debt securities that meet the investment
criteria of the Fund. Consequently, the Fund has concentrated its investments in
a fewer number of issuers than the Board believes is advisable for a single
country investment company and certainly less than would be the case if the Fund
had access to a greater number of companies that meet the Fund's investment
criteria. The Fund's concentration in a relatively few number of issuers (the
Fund held equity securities of 22 Portuguese issuers as of June 30, 2000) has
rendered the Fund especially susceptible to Portuguese capital and currency
market volatility which, in turn, has had an adverse effect on the Fund's net
asset value.
The Board believes that concentrating in any single country increases
the risk exposure of an investment company to the risks that are specific to
that country. In Portugal, the securities markets have substantially less volume
than the securities markets in the United States and in many other developed
countries and the securities of companies in Portugal are generally less liquid
and more volatile than securities of comparable U.S. and non-U.S. companies.
Accordingly, the Portuguese securities markets have been subject to greater
influence by adverse events generally affecting the market and by large
investors trading significant blocks of securities or by large dispositions of
securities than is usual in the United States. Moreover, a high proportion of
the shares of some Portuguese listed companies are held by a limited number of
persons (including the Fund), which limits the marketability of such shares. The
limited nature of the Portuguese securities markets has also affected the Fund's
ability to acquire and dispose of securities at a price and time that it wishes
to do so. Finally, since the Portuguese securities markets are not as highly
regulated and supervised as the U.S. and certain other non-U.S. securities
markets, the prices at which the Fund acquires investments are sometimes
adversely affected by the market's anticipation of the Fund's investing. The
Board believes that these differences between the U.S. (and certain other
non-U.S.) and Portuguese securities markets in terms of volatility, liquidity
and other factors described above have and will continue to affect the Fund's
performance adversely.
By providing the Fund with access to U.S. and non-U.S. issuers whose
securities trade in U.S. capital markets, the Board proposes to increase the
number of potential investments from which the Fund may select portfolio
securities, but does not propose to modify the method according to which the
Fund selects such securities. The Fund will continue to pursue a balanced
approach, including "value" and "growth" investing, by seeking out companies at
reasonable prices that demonstrate favorable long-term characteristics such as
strength of management, competitive position, new products or services, profit
margins and return on investment, and political, regulatory and economic
conditions. In addition, Fund management will continue to use cash generated
from returns on the Fund's investments to buy back shares in the Fund itself, in
order to increase the Fund's net asset value per share, which may, in turn, help
reduce the discount at which the Fund's shares trade in the open market.
11
<PAGE>
As stated above, the Board has considered several factors prior to
recommending this Proposal 2 for approval by the stockholders, including (i)
current liquidity and volatility risk exposure of the Fund's current investment
portfolio, (ii) the long-term prospects of the Fund achieving its investment
objective by investing solely in Portuguese securities, (iii) the long-term
prospects of achieving the Fund's investment objective by investing in U.S. and
non-U.S. securities which trade in the U.S., (iv) the performance record of the
Fund's investments in Portugal only as it compares to that of other registered
closed-end investment companies that invest in U.S. and non- U.S. securities,
(v) political and economic events in Portugal, and (vi) the risks to the Fund
and its stockholders that could arise in connection with the transition from
investment in solely Portuguese securities to investment in the securities of
U.S. and non-U.S. issuers. Upon consideration of these issues, the Board has
concluded that the reasons for the Fund to remain concentrated in Portugal are
no longer valid or practical. In view of the Fund's investment objective of
total return consisting of capital appreciation and current income, the Board
believes that access to U.S. and non-U.S. securities in U.S. capital markets
will enable Fund management to structure a more diversified portfolio of
investments with stronger prospects for total return and current income in more
stable and efficient securities markets. Also, a shift in the Fund's primary
focus from Portuguese issuers to U.S. and non-U.S. issuers whose securities
trade on a U.S. securities exchange, over the counter or as ADRs or IDRs would
result in a significant reduction of the Fund's exposure to investment risks
associated with investment in Portuguese securities, including currency
fluctuations and economic risk. Therefore, based on these considerations, the
Board believes that the recommended Proposal 2 is in the best interests of the
Fund and its stockholders.
ANALYSIS OF PROPOSALS
---------------------
Proposal 2(a) would modify the investment strategy which requires the
Fund to seek to achieve its objective through investing primarily in securities
of "Portuguese securities". If modified, the investment strategy would permit
the Fund to invest its assets primarily in the securities of U.S. and non-U.S.
issuers. Proposal 2(b) similarly would modify the Fund's current fundamental
policy requiring the maintenance of at least 75% of the Fund's total assets in
the equity and debt securities of Portuguese issuers. If modified, the Fund
would be required, under normal market conditions, to invest substantially all
of its assets in equity securities of U.S. and non-U.S. issuers whose securities
are listed or traded in the United States and in U.S. dollar denominated debt
securites.
Proposal 2(c) would make a conforming change to the Fund's policies by
eliminating both the reference to "non-Portuguese equity and debt securities"
with respect to the remaining assets of the Fund as well as the requirement that
the portion of the Fund's assets not invested in Portuguese securities and
short-term instruments be invested in securities of companies that can be
expected to benefit from improvements in the Portuguese securities markets or
economy. Both the reference to "non-Portuguese" securities and the requirement
that the Fund invest only in the securities of such issuers that may benefit
from improvements in the Portuguese securities market or economy are unnecessary
and contradictory to the proposed modifications which contain no such
restrictions.
12
<PAGE>
In connection with the proposed changes to the Fund's investment
strategy, the Board of Directors has approved a conforming modification of the
operating policy which currently permits up to 15% of the Fund's total assets to
be invested in unlisted Portuguese equity securities, including those issued by
new and early stage companies whose securities are not publicly traded. Under
the proposed changes to the Fund's investment strategy and policies, the Board
has approved, subject to stockholder approval of this Proposal 2, the
modification of the operating policy in order to permit the Fund to invest up to
15% of its assets in unlisted U.S. and non-U.S. securities, provided that the
Fund may not invest more than 3% of the Fund's assets in unlisted securities of
companies that, at the time of investment, had less than a year of operations,
including operations of predecessor companies. In addition, under the proposal,
the operating policy restricting the Fund's ability to invest in other
investment companies to those that invest solely in Portugal would also be
eliminated. Elimination of this operating policy would permit the Fund, to the
extent permitted by the Fund's non-fundamental restriction prohibiting the
acquisition of another closed-end investment company's shares for the purpose of
exercising control over such investment company, to invest in other closed-end
investment companies. If modified, the operating policy of the Fund would be
changed in order to permit the Fund to invest up to 15% of the Fund's assets in
non-U.S. equity securities not listed or traded in the U.S. and non-U.S. dollar
denominated debt securities.
For purposes of clarification, please note that the Board DOES NOT
propose changing or modifying any other fundamental investment strategy or
policy of the Fund that requires stockholder approval. It will continue to (i)
invest a portion of its assets in corporate and government debt securities,
provided that such debt securities are U.S. dollar denominated, (ii) invest
primarily in common stocks in addition to preferred stock, convertible
securities and warrants, and (iii) engage in a temporary defensive strategy when
circumstances warrant pending investment in accordance with the Fund's
investment objective and strategies. In addition, the Board does not propose
modifying the criteria used to select portfolio securities and the Fund will
continue to seek out mid to large capitalization companies at reasonable prices
which demonstrate favorable growth characteristics such as strength of
management, productivity, competitive position, technological advances, research
and development, etc. Finally, the Fund will continue to observe a 5% limit on
investment in debt securities that are determined by Fund management to be rated
or comparably rated B or below by Standard & Poors Corporation ("S&P") or
Moody's Investor Services, Inc. ("Moody's").
In connection with the proposed changes, Fund management anticipates
that within 90 days of obtaining stockholder approval for this proposal, a
significant portion of the Fund's current portfolio securities will be sold and
replaced with other securities in accordance with the new investment policies.
As a result, the Fund may incur additional brokerage costs to sell existing
portfolio securities, some of which may currently be illiquid. The sale of
certain of the Fund's securities including, the illiquid securities, if any, may
be at losses that may detract from the ability of the Fund to meet its objective
of long-term capital appreciation. The Fund may also generate capital gains as a
result of its sale of portfolio securities. As a regulated investment company,
the Fund may elect to either distribute realized long-term gains or retain such
gains. If such gains are distributed to the stockholders, stockholders would pay
the taxes on such gains. If such gains are retained, taxes thereon would be paid
by the Fund and appropriate credit and/or refunds would be allowed to the
stockholders. In this regard, stockholders would receive a Form 2439 election
permitting them to file for a credit on their federal income tax forms filed for
the year 2000. The Board will meet with the Fund's independent auditors
throughout the year to review the matter and provide for the appropriate
treatment. Stockholders will be advised prior to the end of the 2000 calendar
year of the Board's decision with respect to the distribution or retention of
these gains.
13
<PAGE>
NAME CHANGE
-----------
In connection with its approval to modify certain of the Fund's
fundamental investment strategies and policies and subject to stockholder
approval of this proposal 2, the Board of Directors unanimously approved the
change of the Fund's name to the "Progressive Return Fund, Inc." The name change
does not change the Fund's fundamental investment objective of seeking total
return consisting of capital appreciation and current income, which may only be
changed by stockholder vote. The Board of Directors believes that the new name
is consistent with that of a registered investment company whose investment
objective is total return consisting of capital appreciation and current income
achieved by strategically investing the Fund's assets primarily in U.S. and
non-U.S. securities which are traded in the U.S. The name change is necessitated
because of Section 35(d) of the Investment Company Act of 1940. Under Section
35(d), the Fund may retain its current name only if the Fund has a policy of
investing at least 65% of its assets in Portuguese securities. Accordingly, the
Board of Directors believes that, subject to stockholder approval of this
proposal 2, changing the name of the Fund to the "Progressive Return Fund, Inc."
is necessary and appropriate and in the best interests of the Fund and its
stockholders.
PROPOSED PRINCIPAL INVESTMENT STRATEGY
--------------------------------------
Set forth below is a description of the investment objective and
policies of the Fund, as they would be effective if the proposed changes to the
Fund's policies are approved by the stockholders:
INVESTMENT OBJECTIVE OF THE FUND
--------------------------------
The Fund seeks to provide investors with total return consisting of
capital appreciation and current income.
PRINCIPAL INVESTMENT STRATEGIES OF THE FUND
-------------------------------------------
The Fund seeks to achieve its investment objective by investing
primarily in equity securities of U.S. and non-U.S. companies and U.S. dollar
denominated debt securities which Fund management believes have demonstrated
fundamental investment value and favorable growth prospects. In general, the
Fund invests in such equity securities that are traded in the United States on a
securities exchange or over the counter or by ADRs, IDRs or other forms of
depositary receipts. Depositary receipts are traded like common stocks in the
United States, are typically issued in connection with a U.S. or foreign banks
or trust companies and evidence ownership of underlying securities issued by a
foreign corporation.
The Fund intends its investment portfolio, under normal market
conditions, to consist principally of equity securities. Equity securities in
which the Fund may invest include common and preferred stocks, convertible
securities, warrants and other securities having the characteristics of common
14
<PAGE>
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.
Fund 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.
The Fund 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.
The Fund 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.
PORTFOLIO TURNOVER. The Fund does not expect to trade in securities for
short-term gains. Higher portfolio turnover rates resulting from more actively
traded portfolio securities generally result in higher transaction costs,
including brokerage commissions and related capital gains or losses. Since the
Fund's investment policies emphasize long-term investment in the securities of
companies, the Fund's annual portfolio turnover rate is expected to be
relatively low, ranging between 50% and 75%.
PRINCIPAL RISKS OF INVESTING IN THE FUND
----------------------------------------
STOCK MARKET VOLATILITY. Stock markets can be volatile. In other words,
the prices of stocks can rise or fall rapidly in response to developments
affecting a specific company or industry, or to changing economic, political or
market conditions. The Fund is subject to the general risk that the value of the
Fund's investments may decline if the stock markets perform poorly. There is
also a risk that the Fund's investments will underperform either the securities
markets generally or particular segments of the securities markets.
15
<PAGE>
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 the Fund. These securities have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity of those issuers to make principal or
interest payments, as compared to issuers of more highly rated securities.
EXTENSION RISK. The Fund is subject to the risk that an issuer will
exercise its right to pay principal on an obligation held by the Fund (such as
mortgage-backed securities) later than expected. This may happen when there is a
rise in interest rates. These events may lengthen the duration (i.e. interest
rate sensitivity) and potentially reduce the value of these securities.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its respective
net assets in illiquid securities. Illiquid securities may offer a higher yield
than securities which are more readily marketable, but they may not always be
marketable on advantageous terms. The sale of illiquid securities often requires
more time and results in higher brokerage charges or dealer discounts than does
the sale of securities eligible for trading on national securities exchanges or
in the over-the-counter markets. A security traded in the U.S. that is not
registered under the Securities Act of 1933 will not be considered illiquid if
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.
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.
16
<PAGE>
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 for temporary or
emergency purposes. 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.
THE DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS,
UNANIMOUSLY RECOMMEND THAT THE STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE PROPOSED MODIFICATIONS TO
THE FUND'S INVESTMENT STRATEGIES AND
FUNDAMENTAL POLICIES AS STATED IN PROPOSAL 2 ABOVE.
In the event that the proposed changes are not approved, CSAM will continue to
serve as the Fund's investment adviser and the Board of Directors will consider
the options available to the Fund in light of the Fund's current investment
policies and market conditions.
REQUIRED VOTE
Approval of each modification of the investment policies of the Fund
requires the affirmative vote of a "1940 Act majority" of the Fund's outstanding
voting securities. The term "1940 Act majority" means the vote of the lesser of
(i) 67% of the Fund's outstanding shares present at the Meeting if stockholders
holding more than 50% of the outstanding shares of the Fund are present in
person or represented by proxy, or (ii) more than 50% of the Fund's outstanding
shares. For purposes of this proposal, abstentions and broker non-votes will be
counted as shares present at the Meeting for quorum purposes but not for voting
and will have the same effect as votes cast against the proposal.
17
<PAGE>
OTHER MATTERS WHICH MAY COME BEFORE
THE MEETING; STOCKHOLDER PROPOSALS
The Board is not aware of any other matters that will come before the
Meeting. Should any other matter properly come before the Meeting, it is the
intention of the persons named in the accompanying Proxy to vote the Proxy in
accordance with their judgment on such matters.
Notice is hereby given that for a stockholder proposal to be considered
for inclusion in the Fund's proxy material relating to its 2001 annual meeting
of stockholders, the stockholder proposal must be received by the Fund no later
than December 2, 2000. The stockholder proposal, including any accompanying
supporting statement, may not exceed 500 words. A stockholder desiring to submit
a proposal must be a record or beneficial owner of Shares with a market value of
$2,000 and must have held such shares for at least one year. Further, the
stockholder must continue to hold such shares through the date on which the
meeting is held. Documentary support regarding the foregoing must be provided
along with the proposal. There are additional requirements regarding proposals
of the stockholders, and a stockholder contemplating submission of a proposal is
referred to Rule 14a-8 promulgated under the Exchange Act. The timely submission
of a proposal does not guarantee its inclusion in the Fund's proxy materials.
Pursuant to the Bylaws of the Fund, at any annual meeting of the
stockholders of the Fund, only such business will be conducted as has been
properly brought before the annual meeting. To be properly brought before the
annual meeting, the business must be (i) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board, (ii)
otherwise properly brought before the meeting by or at the direction of the
Board, or (iii) otherwise properly brought before the meeting by a stockholder.
For business to be properly brought before the annual meeting of the
Fund by a stockholder of the Fund, such stockholder must have given timely
notice thereof in writing to the Secretary of the Fund. To be timely, any such
notice must be delivered to or mailed and received at the Fund c/o Bear Stearns
Funds Management Inc., 575 Lexington Avenue, New York, New York 10022 not later
than 60 days prior to the date of the meeting; provided, however, that if less
than 70 days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, any such notice by a stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which notice of the date of the annual meeting was given or
such public disclosure was made.
Any such notice by a stockholder must set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address,
as they appear on the Fund's books, of the stockholder proposing such business,
(iii) the class and number of Shares of the capital stock of the Fund which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.
18
<PAGE>
The Fund may exercise discretionary voting authority with respect to
any stockholder proposals for the year 2001 annual meeting not included in the
proxy statement and form of proxy which are not submitted to the Fund by
December 2, 2000. Even if timely notice is received, the Fund may exercise
discretionary voting authority in certain other circumstances. Discretionary
voting authority is the ability to vote proxies that stockholders have executed
and returned to the Fund on matters not specifically reflected on the form of
the proxy. IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WISH TO HAVE
YOUR SHARES VOTED, PLEASE TAKE A MOMENT NOW TO VOTE BY COMPLETING, SIGNING AND
RETURNING YOUR PROXY CARD(S) IN THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
ADDITIONAL INFORMATION
INFORMATION PERTAINING TO CERTAIN STOCKHOLDERS
The following table sets forth the beneficial ownership of shares of the Fund,
as of _________________, 2000, by each person known to the Fund to be deemed the
beneficial owner of more than 5% of the outstanding shares of the Fund:
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK % OF FUND'S OUTSTANDING
BENEFICIALLY OWNED, SHARES BENEFICIALLY OWNED,
NAME AND ADDRESS DIRECTLY OR INDIRECTLY, DIRECTLY OR INDIRECTLY,
OF BENEFICIAL OWNER ON ___________, 2000(1) ON _____________, 2000(1)
------------------- ----------------------- -------------------------
<S> <C> <C>
Deep Discount Advisors, Inc.
One West Pack Square
Suite 777
Asheville, NC 28801 ------------- ----%
Ron Olin Investment
Management Company
One West Pack Square
Suite 777
Asheville, NC 28801
------------- ----%
<FN>
----------------
(1) Based solely upon information presented in Schedule 13G, dated
______________, 2000 filed jointly by Deep Discount Advisors, Inc. and
Ron Olin Investment Management Company. The Fund's understanding is that
the aggregate beneficial ownership of shares of the Fund by these
entities as of ______________, 2000 was _______________ shares,
representing ____% of the Fund.
</FN>
</TABLE>
In addition, on October 27, 2000, Cede & Co., a nominee for
participants in the Depository Trust Company, held of record _______________
shares of the Fund, equal to approximately ______% of the outstanding shares of
the Fund.
19
<PAGE>
REPORTS TO STOCKHOLDERS
-----------------------
The Fund sends unaudited semi-annual and audited annual reports to its
stockholders, including a list of investments held. The Fund will furnish,
without charge, a copy of its most recent annual and semi-annual report, upon
request to the Fund at c/o Bear Stearns Funds Management Inc., 575 Lexington
Avenue, New York, New York 10022, telephone (1-800-[___-____]).
OTHER BUSINESS
LITIGATION
----------
Currently, the Fund is a defendant in a purported class action lawsuit
along with CSAM and its former directors (BRAUTIGAM V. PRIEST ET AL.). The
complaint alleges 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. The complaint seeks a declaratory judgment, an order directing
defendants to take "serious steps" to reduce the discount and to hold an annual
meeting, compensatory and punitive damages and attorneys' fees.
The defendants, including the Fund, have entered into negotiations with
the plaintiffs to reach a settlement agreement. A proposed settlement is before
the court pending approval. The costs of defending the former directors in this
matter are being advanced by the Fund pursuant to the rights of indemnity set
forth in the Fund's charter documents and are reflected in the Fund's operating
expenses. The investment adviser may be entitled to similar advancement of
expenses and rights of indemnity. Management believes that neither the outcome
of this litigation nor the Fund's related indemnification obligations will have
a material adverse effect on the financial position or future operating results
of the Fund, although there can be no assurance to that effect.
The Board of Directors of the Fund does not know of any other matter
which may come before the Meeting. If any other matter properly comes before the
Meeting, it is the intention of the persons named in the proxy to vote the
proxies in accordance with their judgment on that matter.
20
<PAGE>
FORM OF PROXY CARD
------------------
THE PORTUGAL FUND, INC.
-----------------------
The undersigned stockholder of The Portugal Fund, Inc. (the "Fund")
hereby constitutes and appoints Ralph W. Bradshaw and William A. Clark, or any
one of them, as proxy of the undersigned, with full power of substitution, to
vote all shares of Common Stock of the Fund standing in his or her name on the
books of the Fund at the Special Meeting of Stockholders (the "Meeting") of the
Fund to be held at the executive offices of Bear Stearns Funds Management Inc.,
575 Lexington Avenue, New York, New York 10022, in Conference Room F on Friday,
December 15, 2000, 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 instructs the said proxies to vote in accordance
with the aforementioned instructions with respect to (a) the election of two
Class I Directors and (b) the approval of certain modifications to the Fund's
investment policies. If no such specification is made, the undersigned will vote
FOR each of the proposals set forth above, and in their discretion with respect
to such other matters as may properly come before the Meeting.
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE PORTUGAL FUND, INC.'S
BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON
FRIDAY, DECEMBER 15, 2000
(To be dated and signed on reverse side)
<PAGE>
Please mark boxes / / or /X/ in blue or black ink.
PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE:
-------
X
--------
1. To elect two Class II Directors: FOR WITHHELD ABSTAIN
William A. Clark [ ] [ ] [ ]
Andrew A. Strauss [ ] [ ] [ ]
2. To approve certain modifications to the Fund's investment policies,
which, if approved, will have the effect of broadening the scope of the
Fund's investment strategies from one of primarily investing in
"Portuguese securities" to one of investing primarily in "the
securities of U.S. and non-U.S. Issuers", as more fully described in
the Proxy Statement:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion to act upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE STOCKHOLDER. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED IN
FAVOR OF EACH PROPOSAL.
Your proxy is important to assure a quorum at the special meeting of
stockholders whether or not you plan to attend the meeting in person. You may
revoke this proxy at anytime, and the giving of it will not effect your right to
attend the special meeting 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.
