The board of directors of two closed-end funds, the $72 million Cornerstone Strategic Return Fund and the $55 million Clemente Strategic Value Fund, has fired Clemente Capital of New York as the investment adviser of both funds effective March 3.

The board also fired Wilmington Trust Company of Wilmington, Del. which has been the sub-adviser to the Clemente Strategic Value Fund, managing the domestic securities portion of the fund since 1997. The fund was originally known as the Clemente Global Growth Fund until 1999 when it changed its focus and name.

At a Jan. 26 meeting of the funds' common board, board members voted to terminate Clemente as the adviser to both funds, according to two preliminary proxy statements filed Feb. 12. Leopold Clemente, president of Clemente Capital who has been president of the closed-end funds, will step down as the funds' manager. Clemente executives declined to comment.

Clemente had been the adviser to the Cornerstone Strategic Return Fund only since April 1. At that time, the board had decided to broaden the investment scope of the fund to allow it to invest in U.S. and other global companies and hired Clemente to manage the fund. The fund's name was changed to Cornerstone Strategic Return Fund to better reflect the revised focus.

Until then, the fund had predominantly invested in European countries' securities and had been known as the Central European Value Fund. It had been managed by PIMCO Advisors of Newport Beach, Calif., and OpCap Advisors of New York, a subsidiary of Oppenheimer Capital which is owned by PIMCO. But last March, both firms said they were not interested in managing the revamped fund and would discontinue investment advisory services to the fund.

Now the board of the two funds is seeking shareholder approval to appoint Cornerstone Advisors of Asheville, N.C., a newly registered investment advisory firm, as the funds' new manager.

Cornerstone is now majority owned by Ralph Bradshaw who is also the president and director of the investment firm, the proxy said. Bradshaw was appointed chairman of the board of both funds last year. If shareholders approve the appointment of Cornerstone, Bradshaw will be the portfolio manager for both funds.

Bradshaw, who was vice president of Deep Discount Advisors also of Asheville, N.C., until 1999, had been a consultant to Deep Discount. Deep Discount is run by Ron Olin, a closed-end fund activist who, along with Bradshaw and others, has successfully won seats on the boards of several closed-end funds over the past several years.

But while Olin has now stepped down from the boards of these closed-end funds and has opted to become a passive investor, Bradshaw is seeking to personally manage the funds through his newly launched advisory firm, said Thomas Westle, an attorney with Spitzer & Feldman of New York. Westle is counsel and corporate secretary to both funds.

These are older established funds which have been staggering along, plagued with persistent discounts, said Westle. While Clemente has done a fair job managing the funds, "the board decided it made sense to take more control and make management more responsive to shareholders," he said.

Bradshaw is also seeking to take over the management of a third closed-end fund, the Progressive Return Fund, which had previously been known as The Portugal Fund. The same people who serve on the Clemente and Cornerstone fund boards sit on this fund's board. That board won approval from shareholders Dec. 15 to change the mandate of the fund to allow it to invest in U.S. and non-Portugal foreign securities. The board also won approval to change the name of the fund. The fund had predominantly invested in the securities of Portuquese companies.

Faced with an investment shift, Credit Suisse Asset Management of New York, which had managed the fund, resigned as the investment adviser effective Dec. 31, said Westle. Bradshaw has been co-managing the fund as a temporary employee of the fund since then.

A preliminary proxy asking shareholders to approve Cornerstone as the new adviser of this third fund was also filed Feb. 12. The final proxies were being mailed to investors of all three closed-end funds last week, said Westle. A meeting of shareholders of all three funds is scheduled for April 19.

The move to appoint Cornerstone Advisors as the new adviser to all three funds was, in part, motivated by the board's desire to create a family of closed-end funds, according to the proxies.

"No one has [yet] created a closed-end family of funds by acquiring them," said Westle. The more common method of assembling a family of closed-end funds - by creating new funds through initial public offerings - is quite difficult given the lack of interest among investors in new closed-end products. For now, these three closed-end funds will be the only clients of Cornerstone, Westle said.

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