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 Material under Rule 14a-12
Prudent Bear Funds, Inc.
(Name of Registrant as Specified in its Charter)
----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[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 the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[Letterhead of Prudent Bear Funds, Inc.]
Notice of Special Meeting of Shareholders
Of the Prudent Safe Harbor Fund
To be Held December 15, 2000
To Shareholders of the Prudent Safe Harbor Fund:
We invite you to attend a special meeting of shareholders of the Prudent
Safe Harbor Fund, a portfolio of Prudent Bear Funds, Inc., on Friday, December
15, 2000, at 10:00 a.m. (Central Standard Time), at our principal executive
office at 8140 Walnut Hill Lane, Suite 300, Dallas, Texas 75231. As we describe
in the accompanying proxy statement, the shareholders will vote on amending the
Fund's fundamental investment restriction concerning diversification of
investments so that the Fund will no longer be considered to be a diversified
investment company and on any other business that may properly come before the
special meeting.
We have enclosed a proxy card with this proxy statement. Your vote is
important, no matter how many shares you own. Even if you plan to attend the
special meeting, please complete, date and sign the proxy card and mail it as
soon as you can in the envelope we have provided. If you attend the special
meeting, you can revoke your proxy and vote your shares in person if you choose.
We look forward to seeing you at the special meeting.
PRUDENT BEAR FUNDS, INC.
Gregg Jahnke
Secretary
Dallas, Texas
November __, 2000
<PAGE>
FREQUENTLY ASKED QUESTIONS
Q: Why have I received this proxy statement?
Our Board of Directors has sent you this proxy statement, starting around
November ___, 2000 to ask for your vote as a shareholder of the Prudent
Safe Harbor Fund.
Q: What am I voting on?
You will vote on amending the Fund's fundamental investment restriction
concerning diversification of investments so that the Fund will no longer
be considered a diversified investment company. Our Board of Directors is
not aware of any other matter which will be presented for your vote at the
special meeting.
Q: Do I need to attend the special meeting in order to vote?
No. You can vote either in person at the special meeting or by completing
and mailing the enclosed proxy card.
Q: How will proxies be solicited?
We will solicit proxies by mail. In addition, certain of our officers and
employees may solicit by telephone, telegraph and personally. We will not
pay these officers and employees specifically for soliciting proxies. We
will bear the cost of soliciting proxies, including preparing, assembling
and mailing the proxy material.
Q: Who is entitled to vote?
If you owned shares of the Fund as of the close of business on the record
date, October 31, 2000, then you are entitled to vote. You will be
entitled to one vote per share for each share you own on the record date.
Q: How many shares of the Fund's stock are entitled to vote?
As of the record date, __________ shares of the Fund were entitled to
vote at the special meeting.
Q: What happens if the special meeting is adjourned?
The special meeting could be adjourned if a quorum does not exist. For
purposes of any adjournment, proxies will be voted "for" adjournment
unless you direct otherwise by writing anywhere on the enclosed proxy that
you will vote against any adjournments.
Q: What constitutes a quorum?
A "quorum" refers to the number of shares that must be in attendance at a
meeting to lawfully conduct business. A majority of the votes of the
shares of the Fund entitled to be cast represent a quorum. As a result,
holders of _________ shares of the Fund must be present in person or
represented by proxy at the special meeting to constitute a quorum.
Q: What happens if I sign and return my proxy card but do not mark my vote?
David W. Tice and Gregg Jahnke, as proxies, will vote your shares to
approve amending the Fund's fundamental investment restriction concerning
diversification of investments so that the Fund will no longer be
considered a diversified investment company.
Q: May I revoke my proxy?
You may revoke your proxy at any time before it is exercised by giving
notice of your revocation to us in writing (by subsequent proxy or
otherwise). Your presence at the special meeting does not itself revoke
your proxy.
Q: Who will count the votes?
Firstar Mutual Fund Services, LLC, our transfer agent and registrar, will
count the votes and act as inspector of elections.
Q: What percentage of the outstanding shares do directors and officers own?
As of October 31, 2000, our directors and officers together own less than
1% of the outstanding shares of the Prudent Safe Harbor Fund. See page 4
for more details.
Q: Why does the Board of Directors support amending the restriction regarding
diversification?
A principal investment strategy of the Fund is to invest in securities
issued by the major industrialized nations as well as other countries with
sound economic and financial systems. Currently, the Fund's ability to
invest in securities issued by any one foreign government is limited.
The proposed amendment would allow greater flexibility by allowing more of
the Fund's assets to be invested in the securities of a single foreign
government. This increased flexibility would allow the Fund to limit its
investments to government securities of countries that it feels have the
best opportunities for currency appreciation versus the dollar.
Q: How can I obtain a copy of the annual report?
You may request a copy of our latest annual report and the semi-annual
report succeeding the annual report by writing to Prudent Bear Funds,
Inc., 8140 Walnut Hill Lane, Suite 300, Dallas, Texas 75231, Attention:
Corporate Secretary, or by calling 1-800-711-1848. We will furnish these
copies free of charge.
1
<PAGE>
Proposal: To Approve Amending the Fund's Fundemental Investment Restriction
Concerning Diversification of Investments.
General. Our Board of Directors has proposed that the fundamental
investment restriction of the Prudent Safe Harbor Fund concerning
diversification of investments be amended to allow the Fund to become a
"non-diversified" fund. The proposal will become effective only upon shareholder
approval. If the proposal is not approved by the shareholders, the current
investment restriction will remain unchanged.
Discussion. The current investment restriction of the Fund concerning
diversification of investments, which is a fundamental policy and cannot be
changed without shareholder approval, states:
"1. Neither Fund [this investment restriction also applies to
Prudent Bear Fund] will purchase securities of any issuer if the purchase
would cause more than 5% of the value of the Fund's total assets to be
invested in securities of such issuer (except securities of the U.S.
government or any agency or instrumentality thereof), or purchase more
than 10% of the outstanding voting securities of any one issuer, except
that up to 25% of each Fund's total assets may be invested without regard
to these limitations."
Subject to shareholder approval, this investment restriction will be amended on
behalf of the Fund (the investment restriction will remain unchanged on behalf
of the Prudent Bear Fund), and the Fund will elect to be a "non-diversified"
fund. In addition, the Fund will amend its current prospectus to modify the
description of its diversification
As amended investment restriction No. 1 will read as follows:
"Neither Fund will purchase securities of any issuer if the
purchase would cause more than 5% of the value of the Fund's total assets
to be invested in securities of such issuer (except securities of the
U.S. government or any agency or instrumentality thereof), or purchase
more than 10% of the outstanding voting securities of any one issuer,
except that up to 25% of the Prudent Bear Fund's total assets and 50% of
the Prudent Safe Harbor Funds total assets may be invested without regard
to these limitations."
Mutual funds often diversify their investments among many different
securities. However, mutual funds are free to choose the extent to which they
will diversify their investments, provided that they meet certain minimum limits
set forth in the Investment Company Act of 1940, as amended, and/or the Internal
Revenue Code of 1986, as amended. Generally, in order to be diversified under
the Investment Company Act of 1940, a fund may not invest more than 5% of its
total assets in a single issuer (except U.S. government securities, as defined
in the Investment Company Act of 1940), or purchase more than 10% of the
outstanding securities of a single issuer. This limit only applies to 75% of the
fund's total assets, which means that any fund which is diversified under the
Investment Company Act of 1940 may invest up to 25% of its assets in a single
security. If a fund elects to be "non-diversified" under the Investment Company
Act of 1940, it must still operate within the diversification requirements of
the Internal Revenue Code, which are similar to the diversification requirements
of the Investment Company Act of 1940, but apply only to 50% of a fund's assets,
rather than 75%. As to the remaining 50% of fund assets, a fund may buy as few
as two separate securities, each representing 25% of the value of the fund.
The Fund is currently classified and operates as a "diversified" fund, as
that term is defined in the Investment Company Act of 1940. Our Board of
Directors recommends that the Fund change its classification to
"non-diversified", which means that the Fund will operate within the more
flexible diversification restrictions contained in the Internal Revenue Code.
2
<PAGE>
A principal investment strategy of the Fund is to invest in securities
issued by the major industrialized nations as well as other countries with sound
economic and financial systems. For purposes of the diversification requirements
under both the Investment Company Act of 1940 and the Internal Revenue Code,
securities issued by foreign governments are subject to the same limitations as
securities issued by any issuer other than the U. S. government, its agencies
and instrumentalities. Accordingly, if the proposed amendment is approved by the
shareholders, the Fund will be able to invest a greater portion of its assets in
securities issued by any single foreign government. This will allow greater
flexibility to the Fund's investment adviser in managing the Fund's assets. For
example, if the Fund's investment adviser believes that the U. S. dollar will
decline relative to the Euro, the Fund could invest a greater percentage of its
assets in securities issued by the French and German governments than it could
if the proposed amendment was not approved.
By becoming a "non-diversified" fund, the Fund will likely invest in
securities issued by fewer foreign governments than it did as a "diversified"
fund, and its performance may be more volatile. However, our Board believes that
the proposal will improve the Fund's potential to achieve its investment
objective. In approving the proposal, our Board considered the following
factors:
o the relatively small number of nations capable of issuing debt
securities rated in the two highest rating categories of a
nationally recognized securities rating agency; and
o the previous experience of the Fund's investment adviser in
managing the Fund and the relative difficulty it experienced in
locating attractive investments that fit the Fund's investment
objectives.
Any future change from non-diversified to diversified status by the Fund
would not require shareholder approval under the Investment Company Act of 1940.
If the proposed change is approved, it will become effective January 31, 2001.
If the proposed change is not approved, the Fund will continue to operate within
the diversification limitations of the Investment Company Act of 1940.
Required Vote. The favorable vote of the holders of a "majority" (as
defined in the Investment Company Act of 1940) of the outstanding shares of the
Fund is required for the approval of the proposal. Under the Investment Company
Act of 1940, the vote of the holders of a "majority" of the outstanding shares
of the Fund means the vote of the holders of the lesser of (a) 67% or more of
its shares present at the special meeting or represented by proxy if the holders
of 50% or more of its shares are so present or represented; or (b) more than 50%
of its outstanding shares. Abstentions and broker non-votes will not be counted
for or against the proposal but will be counted as votes present for purposes of
determining whether or not more than 50% of the outstanding shares are present
or represented at the special meeting. The failure to vote (other than by broker
non-votes or abstentions), assuming more than 50% of the outstanding shares of
the Fund are present, has no effect if (a) above is applicable and has the same
effect as a vote against the proposal if (b) above is applicable. Abstentions
and broker non-votes have the same effect as a vote against the proposal. If the
proposal is not approved at the special meeting, the current investment
restriction will remain unchanged.
Recommendation. Our Board has unanimously approved the proposal and has
determined that the proposal is in the best interests of the Fund. Our Board
believes that the proposal will improve the Fund's potential to achieve its
investment objective. We recommend a vote "for" the proposal.
3
<PAGE>
Principal Shareholders
As of October 31, 2000, the officers and directors of Prudent Bear Funds,
Inc. as a group owned less than 1% of the outstanding shares of the Fund. At
October 31, 2000, the following persons owned more than 5% of the Fund's
outstanding shares:
Name and Address
of Beneficial Owner Number of Shares Percent of Class
---------------------- ---------------- ----------------
INVESTMENT ADVISER
The Fund's investment adviser is David W. Tice & Associates, Inc. with
its principal office located at 8140 Walnut Hill Lane, Suite 405, Dallas, Texas
75231.
ADMINISTRATOR
The Fund's administrator is Firstar Mutual Fund Services, LLC with its
principal office located at 615 East Michigan Street, Milwaukee, Wisconsin
53202.
RECEIPT OF SHAREHOLDER PROPOSALS
Under the proxy rules of the Securities and Exchange Commission,
shareholder proposals meeting tests contained in those rules may, under certain
conditions, be included in our proxy materials for a particular meeting of
shareholders. One of these conditions relates to the timely receipt by us of any
such proposal. Since we do not have regular annual meetings of shareholders,
under these rules, proposals submitted for inclusion in the proxy materials for
a particular meeting must be received by us a reasonable time before the
solicitation of proxies for the meeting is made. The fact that we receive a
shareholder proposal in a timely manner does not insure its inclusion in our
proxy materials since there are other requirements in the proxy rules relating
to such inclusion.
OTHER MATTERS
The Board knows of no other matters that may come before the special
meeting. If any other matters properly come before the special meeting, it is
the intention of the persons acting pursuant to the enclosed form of proxy to
vote the shares represented by said proxies in accordance with their best
judgment with respect to such matters.
SOLICITATION
We will bear the cost of soliciting proxies. We expect to solicit proxies
mainly by mail. Some of our employees may also solicit proxies personally and by
telephone. We do not anticipate that we will retain anyone to solicit proxies or
that we will pay compensation to anyone for that purpose. We will, however,
4
<PAGE>
reimburse brokers and other nominees for their reasonable expenses in
communicating with the persons for whom they hold shares of the Fund.
If you would like to receive a copy of our latest annual report and
semi-annual report succeeding the annual report, please write to Prudent Bear
Funds, Inc., 8140 Walnut Hill Lane, Suite 300, Dallas, Texas 75231, Attention:
Corporate Secretary, or by calling 1-800-711-1848. We will furnish these copies
free of charge.
PRUDENT BEAR FUNDS, INC.
Gregg Jahnke
Secretary
Dallas, Texas
November __, 2000
5
<PAGE>
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
OF PRUDENT SAFE HARBOR FUND
Prudent Bear Funds, Inc.
December 15, 2000
The undersigned constitutes and appoints David W. Tice and Gregg Jahnke,
and each of them singly, with power of substitution, attorneys and proxies for
and in the name and place of the undersigned to appear and vote with the same
effect as the undersigned at the special meeting of shareholders of the Prudent
Safe Harbor Fund (the "Fund"), to be held at 8140 Walnut Hill Lane, Suite 300,
Dallas, Texas 75231, on Friday, December 15, 2000 at 10:00 a.m. (Central
Standard Time), and at any adjournments or postponements thereof, all shares of
stock of the Fund which the undersigned is entitled to vote as follows:
To amend the Fund's fundamental investment restriction concerning
diversification of investments so that the Fund will no longer be considered a
diversified investment company.
For |_| Against |_| Abstain |_|
This proxy will be voted as specified.
If no specification is made, this proxy
will be voted for the proposal. The
signature on this proxy should
correspond exactly with the name of the
shareholder as it appears on the proxy.
If stock is issued in the name of two or
more persons, each should sign the
proxy. If a proxy is signed by an
administrator, trustee, guardian,
attorney or other fiduciary, please
indicate full title as such.
Dated ____________________, 2000
Signed__________________________________
Signed__________________________________
This proxy is solicited on behalf of the
Board of Directors of Prudent Bear
Funds, Inc.
|_| Please check here if you will be attending the meeting.
